Thank you for standing by, and welcome to the Aston Martin Q3 2021 results conference call. At this time, all participants are in listen-only mode. There will be a presentation, followed by a question and answer session, at which time, if you are connected on the phone line, you may need to press star one on your telephone. I must advise you that your conference is being recorded today, Thursday, the 4th of November, 2021. I would now like to hand over the conference to the CEO today, Tobias Moers. Please go ahead, sir.
Hello, and good morning, everyone, and welcome to Aston Martin's Q3 2021 results Q&A. I'm Tobias Moers, CEO, and I'm joined by Ken Gregor, CFO. We will give you a brief review of our performance, and then we will be happy to take your questions. There are some short slides to accompany our comments, which can be found on the results page of our website. I'm almost really pleased with our performance to date, delivering strong results in line with our plan. Both wholesales and revenues nearly tripled year-on-year, and adjusted EBITDA improved by GBP 190 million to GBP 72 million with 10% margin.
The shift to a demand-led ultra-luxury operating model that we achieved earlier this year has been the main catalyst in supporting our continued strong pricing dynamics, and I'm happy to confirm that we have all the cover through 2021 extending into 2022. The excitement around and demand for the brand is tremendous, with increased interest to be part of our journey from potential new dealers and fantastic demand for our limited run specials like Valkyrie, for example. I'm extremely happy to announce today that we have completed an unbelievable step in our Aston Martin Valkyrie journey, completing the first customer car earlier this week. This journey has been long and challenging, but we are finally at the point that we are scaling up the assembly of this very complex vehicle, which is comparable with a Formula One car build.
To deliver the Q4, we also have to AMR Pro deliveries commencing later in the quarter as well. The final member of the Valkyrie family, the Spider, was unveiled at Pebble Beach and is now two times oversubscribed. We are now finalizing the unit allocations to our customers. On the other hand, our excellent progress on Project Horizon, driving efficiency and agility throughout our business, is delivering results with further operational milestones achieved during the quarter as we completed the consolidation of our paint shop and restructuring of our St. Athan operations. Similar to our peers, we continue to navigate the challenging supply chain environment and are closely monitoring the evolving landscape daily in order to mitigate disruption.
We have also today reiterated our ambitions for our electrification journey with the expectation that by 2030, over 90% of our portfolio will be electrified or battery electric. In addition, we have committed to sharing a renewed ESG strategy in Q1 next year, integrated with and aligned to our business plan. Our confidence in delivering our transformational growth strategy to create a world-class, sustainable ultra-luxury brand is underpinned by our excellent progress on execution to date, as demonstrated with the results we have reported today. With that, I'd like to hand over to Ken.
Thanks, Tobias, and good morning, everyone. As Tobias said, we've seen a tremendous improvement in our business performance in 2021, and that's reflected throughout the financial results. As he said, we saw wholesales trebling year-to-date to 4,250 units. That included 56 specials, mostly V12 Speedsters. Geographically, the Americas and APAC, including China, were the strongest markets representing 34% and 28% respectively, both showing high DBX penetration, which is what we expected and we're pleased to see. We've continued to see strong pricing dynamics with the core average selling price of round about GBP 150,000 per unit year-to-date.
That's been driven by significantly reduced financial support per vehicle compared to the level seen in 2020, and being supported by the low levels of dealer stock, both in terms of units and importantly age, and stronger residual values. As Tobias said, we've seen excellent progress on Project Horizon, both in terms of cost and working capital improvements through the year. All of that combined helped to contribute to an adjusted EBITDA of GBP 72 million for the nine-month period with a 10% margin, which was a GBP 190 million improvement on the same period in the prior year. Turning to cash flow, we saw a GBP 5 million inflow in Q3, bringing the year-to-date outflow to GBP 39 million, which is a, you know, really substantial GBP 475 million improvement over the same period in the prior year.
As a result, we closed the quarter with just under GBP 500 million of cash on the balance sheet. Looking forward into Q4 and the full year, there's no change to our unit or EBITDA guidance. We've got good visibility of orders through the year-end and into 2022. As usual, we've updated our financial interest guidance, which includes the revaluation of our foreign currency debt and also some fair value movements on the outstanding warrants. There's no change to the cash interest guidance. We've updated our CapEx and R&D and depreciation and amortization guidance as well. On the CapEx and R&D side, we do now expect that to come in lower than originally planned. We're now talking about a range of GBP 215 million-GBP 235 million.
That's really due to the timing of spend rather than changes to product plans, and we do expect the lower CapEx that we've seen this year to re-phase into 2022, and the same is true of depreciation and amortization, which we've also updated. In summary, we're on track. We're starting to see some of the results of our actions we've taken to transform Aston Martin into a profitable cash generative company. Our focus very much remains on delivering against the medium-term plan, and our progress year-to-date gives us the confidence in achieving those targets. Thanks very much for bearing with us. More than happy to take your questions now.
Thank you. As a reminder, ladies and gentlemen, if you do have any questions on the phone line, please press star one on your telephone and it's the pound or the hash key to cancel. Once again, it's star one if you have any questions or comment at this time. We have a first questions coming from the line of Charles Coldicott from Redburn. Please ask your question.
Yeah. Good morning, everyone. It's Charlie from Redburn. Thank you for taking my questions. I've got two, please. My first question is on your level of confidence in the full year guidance. Obviously the Valkyrie is pivotal. So can you tell us how many complete vehicles you have ready for delivery? And maybe also can you comment on the sort of pace that you can produce the Valkyries at, maybe for instance, how many per week? Then on the core range, you had this decrease in wholesales between Q3 and Q2 because of the work being done on the assembly lines. Obviously you now need a big step up in Q4.
I know you don't disclose retail sales anymore, but perhaps to reassure about the level of demand, could you comment on the retail sales in Q3? Was the quarter-on-quarter change in retail sales less than the decrease in wholesales, for instance? Maybe give us an idea of what would drive an increase in the core range going into Q4. Then my second question on the CapEx rephasing: have there been any projects that have been delayed or is there another explanation for the CapEx being rephased into 2022? Thank you.
I'll take your Valkyrie question. Valkyrie, we're chasing for having a double-digit number delivered this year. In addition to that, we have a parallel assembly of the track-only Valkyrie as well, where we chase for a single digit number to deliver to customers. You know, the good side of that story is it's unbelievable that we achieved that momentum now. The cars are in kind of an assembly line. It's a specific assembly. It's one of the most complex car I ever saw in my life to assemble. It's like building Formula One cars in an assembly line. We're confident that we achieved that. This is where we are at the moment.
You know, then, you know, just building the top for the Valkyrie is a six-week lead time. You cannot just increase the capacity because you have a limited capacity all over the places if you talk with manufacturers. The maximum what we probably can achieve next is three cars a week. We increasing our capacity and we ramp up, but it's not a normal ramp up of a car production. Most of the Valkyrie is anyway linked to 2022, and then after Valkyrie Coupe, we move in Valkyrie Spider in that assembly line. That's not a big problem. No. Thanks, Tobias. Just taking your other couple of points. On retails in Q3 were a little bit ahead of wholesales, which was good to see.
That's also therefore the case year to date. We're happy with the development of the retail internally. Although we don't disclose the numbers externally, internally, we pay very close attention to that. CapEx, no, there's no change to the product plan overall. The rephasing is just a question of the timing of the spend and when we expect to make commitments on supplier engineering and supplier tooling, which is coming a little bit later than we originally forecast. I'm fully expecting that to retime into 2022. But no change to product plan. No, there is no delay, there is no nothing. Everything is on track.
Great. Thank you for that. Just to come back to the core range into Q4, the reason for the pickup, is it just the seasonality of the business? If so, why is that?
Well, we had.
Is it more to do with the mild hybrid?
No, we had a summer break like this year as well, two weeks in both plants, so this is normal. Normally, the company tried to cover that with creating more wholesales before that. We never do that. So it's just a normal seasonality that we face at the moment.
Yeah. Great. Thank you.
We have the next questions coming from the line of George Galliers from Goldman Sachs. Please ask your question.
Thank you. Thank you for taking my questions. I really wanted to talk about three different areas, if possible. The first one is just from the DBX derivatives. Is it correct that the first derivative, which is in production, is a mild hybrid? Is that car available globally or just in select markets? Then can you confirm if there is any intention to have a plug-in hybrid variant in the future of the DBX? The second question is how we should think about the DBX volumes for 4Q and next year. Do you expect fourth quarter DBX volumes to surpass 2Q or just to sequentially improve on the third quarter? Now that you've restructured St. Athan and you will have the new derivative, is it fair to assume healthy growth of DBX volumes for 2022 relative to 2021?
Finally, on pricing, it looks like you saw a mid-single-digit improvement in pricing in the quarter. Is this more a function of taking away variable marketing or actions to increase list prices? When we think about pricing going forward, now you have a very strong balance between demand and supply. Do you see scope to implement a plan to increase pricing by a certain percentage each year and every year, as is prevalent in other areas of the luxury sector?
Did you want to start on DBX?
Mild hybrid. Yeah, it's a mild hybrid. We are betting on timing with the launch. That's gonna happen in China. We're gonna unveil the car in Shanghai and then it's on the Guangzhou Auto Show. The cars are on the boat, the car on the way, ramp up work quite well, everything done. That's everything in line with our plan. We're gonna have a next derivative by end of the first quarter next year. That car, that mild hybrid is more or less now for China. That's a China purpose only at the moment. Don't know if we're gonna bring it in other markets to life. For the other markets, as well for China, we're gonna have another derivative by end of the first quarter next year.
Yes, we see some momentum for our plans regarding the volume of DBX for next year. Don't want to talk about the detail, but yeah, there is a momentum for next year. What was the next one? The hybrid question. Yes, further down the road, there is a hybrid DBX, a full hybrid, plug-in hybrid in our planning, but that's more or less linked now to the facelift of a DBX, which is not taking place next year. That's a bit further down the road.
George, on the pricing side, in Q3, what you really saw was a continuation of the same trends as we saw in the first half on net revenue, with the lower incentive spend continuing to be the biggest driver to seeing the average selling price in the region of GBP 150,000 per unit across the core vehicle range. It does always ebb and flow by quarter because of product mix and market mix and a little bit on exchange rate. That's probably explaining the variation that you referred to.
Going forward, yeah, we you know we obviously keep an eye on our competitors' prices and think about our own price positioning and, you know, there is the possibility for a little bit of inflation-driven pricing, that we think we can, that we can achieve as well. The biggest driver year to date has been the lower incentive spending, which we're really pleased to see.
Great. Thank you very much.
We have the next questions coming from the line of Philippe Houchois from Jefferies. Please ask your question.
Yep. Good morning, and thank you for letting me ask questions. The first one I have is if I think about what you said earlier in the year about the volume for DBX, on my math, you know, you need to deliver about 1,000 of those in Q4. I'm just trying to get a sense of confidence that you can, you know, deliver 1000 DBX in Q4. And if not, when do we get to a point where we get a run rate of 1,000, you know, produced out of St. Athan? That'd be my first question. The second one is, I'm looking at your gross margin. It's been sub 30 for a while. It's now jumping to 33% in Q3, which is good news.
I think you need to go to 40 or so. Can you know, quantify the drivers of the improvement? Of course, there's a bit of pricing, there's probably a bit of specials, but any kind of good news or structural improvement in the cost base, either purchasing or internal costs that drove the gross margin improvement? Thank you.
Thanks for the questions. I think on the pricing side, you put your finger on it already. The continued strong net revenue performance, lower incentives is part of that, gross margin performance. In particular in Q3, we had, I'm trying to find the right number. Year to date, 36 specials, and those are contributing mostly V12 Speedster, and those are contributing to the tick up in the gross margin percentage, which is good to see. On the DBX side, year to date, the number of wholesales is about 2,200.
You know, when we step back and what we said before about overall volume, round about 6,000 units for the full year, round about half being DBX, and therefore we're very much on track to achieve that. It doesn't quite need 1,000 units in Q4 to get there.
Could you physically get 1,000 units through St. Athan or that's not possible or could happen at a later date?
They can easily build 1,000 units per quarter if there is a need for yeah.
Right. Okay. All right.
That's more a question of, you know, manning and line loading and how you organize the shift patterns. The physical capacity is there to be able to do that.
Right. Going back to the Q3 comments from Ken, then the bad news, I guess, in a way, it's all mix and price, the cost base or your average cost per range car is not improved in Q3.
Sure.
We talk about the big drivers, and year-on-year, that's mostly volume and price. The cost savings there are there as well. We see, you know, in the margin percentage that is now 33% in the quarter, or averaging 30% for the full year, if you compare that to the gross margin in the same period a year ago, it's a massive improvement. Part of that is the operating leverage and the operating efficiency of having significantly more volume going through the production facilities this year compared to last year. We start to see the benefit also of actions to improve how we paint the vehicles, the line efficiencies in St. Athan. They're all contributing to help improve that gross margin.
Okay, great. Thank you very much.
We have the next questions coming from the line of Henning Cosman from HSBC. Please ask your question.
Hi, good morning. Thank you for taking my question. Sorry. As a first one, I wanted to come back to the implied guidance for Q4. If I take your investor relations consensus of full year adjusted EBITDA of GBP 150, that implies 88 for Q4, adjusted for the legal cost. I was just wondering if you could help us again to sort of reconcile that. I understand that, you know, you said you want to sell double digit units Valkyrie, but for the Valkyrie, for this to be attributable to Valkyrie alone, it would have to be almost GBP 2 million EBITDA per unit. That seems a bit steep.
I hope you could, you know, help us a little bit understand the other moving parts and again, why your confidence in achieving the guidance is so high. Secondly, similar to Philippe's question, on the Project Horizon, is it possible that you give us a bit of a sort of new baseline and maybe talk about the next milestones, just to make it a bit more tangible and measurable for us. Is it possible to share maybe your view on, you know, points of gross margin improvement or what we should be looking out for to sort of track how you're getting on with Project Horizon going forward?
You said you have very good visibility on orders, and so I thought you could maybe, you know, I don't know if you want to, but if you could just help us a little bit on wait list terms, model by model or region by region, just anything that you could sort of comment in terms of giving a bit more color. Are the wait lists getting longer? Are they getting shorter for certain vehicles? That would be great. Thank you.
You know, the order bank. When we talk about our order bank on the core business, that all order banks regarding our core business are into 2022, yeah, so first quarter. Is it always reasonable to have an order bank for a core business like Vantage and DB11 for the next 6-8 months? That's questionable because people don't want to wait that long for these cars. I'm more than happy with that, where we are at the moment with the regions and everywhere. It's not different, North America, U.K., China, whatever. That, that's okay for us, and it's in line what we need as an expectation and a forward-thinking program plan for our assembly lines on operational site. I'm more than happy with that.
You know, there's a number of pieces come together to support the Q4 delivery. Yes, you've got Valkyrie, and yes, that's really important, as we've pointed out in our guidance. There's a range of how we see the number of units of Valkyrie and the Track Pro car that Tobias talked about earlier, in terms of what we can see in Q4. Yes, those do have a very high unit contribution ranging towards the figure you saw. There's a range of different contributions depending on the model and how they've been specified, and the options contribution coming. They are very high contribution per unit, and the full year result is very sensitive to the number of units that get produced.
In addition to Valkyrie, we've got the balance of the Speedsters, the V12 Speedsters that we're planning to deliver in Q4. As we already talked about, we've got DBX, including the first deliveries of the shipments of the mild hybrid derivative that Tobias talked about for China, and also the seasonality that we talked about in terms of production phasing compared to Q3. Look, there's lots of elements coming together in Q4 to support the overall full-year delivery.
Thank you. Just on Horizon, if I may.
Project Horizon, you know, we achieved everything what we tried to achieve. The line consolidation, the operational side, all the efficiencies where we talk about 2030 depends on the area where we are. Everything pays off now. We are now in a situation that we have to consolidate the whole situation. We did all the paint consolidation. Even doing the paint strategy was more than GBP 1,000 per car. This is now in the books kind of. Now we have to establish the next steps. You know, the massive thing, the massive work has been done. We need to. There's still some areas where we gonna find some improvement, especially on the inbound, outbound on the logistics side, but you cannot do everything in parallel.
Some areas are not moving that quick. The next step is logistic realignment, and then it's improvement on piece prices where we are. We do some good stories, but in today's time, with that small volume, what we manufacture as cars to get 10% piece price reduction of the supplier is not so easy. We are okay with that. Did we achieve everything we'd like to achieve? No, we don't, because you have long-lasting contracts with your suppliers, but this is a journey. We're not gonna give up on that. We see some bits and pieces where we have 10%-15% decrease on piece prices, but it's not cross-car line, and it's not all parts.
Sorry, Tobias, just to clarify, when you say that most of the heavy lifting is done now, you're talking about the operational implementation, right?
Yes.
The financial impact is still going to come through now from Q4.
Yeah, yeah
as well?
Yeah, absolutely. Yeah, exactly. Well put. Perfect. Yeah.
All right. Thank you.
Exactly what I mean. Yeah.
We have the next questions coming from the line of José Asumendi from JP Morgan. Please ask your question.
Good morning. José Asumendi from JP Morgan. Tobias Käld. Couple of questions, please. Just going back to this pricing momentum, if you could just share some thoughts as to how you think you can improve your ASP in regions like North America and China. That will be the first question. Second, can you remind us of how you're set up in terms of financial services and whether you know you could improve your offering in financial services with additional partners, or do you see any opportunities there going forward? Then just going back again, final one on the operational efficiencies. Is there anything else, Tobias, that you can do into Q4, into next year in terms of the assembly line? Any other.
I mean, I hear from the last question that, you know, more or less everything has been done. But, you know, from an operational perspective, from an assembly perspective, is there anything else you can actually that you see the need to improve? I'm sure there's something that, you know, continuous improvement is embedded, I'm sure, in the DNA of the company. Thank you.
Well, maybe I'll start, Jose. On the financial services side, we have what I would call white label arrangements with a financial services provider in our major markets. By that I mean, we partner with FCA Bank in Europe, we partner with Alphera in the U.K., and we partner with JPMorgan Chase in North America who provide the retail financing support to our dealers to enable them to offer retail financing offers which vary in importance region by region, really super important in the U.S.
We work really closely with the dealers and with the financial services providers to seek to optimize and the residual value setters to seek to optimize the offers that we can that we make in the showroom to make sure they're as competitive as they can be on a monthly lease rate sort of basis. We always look to see can we, you know, we keep a very close eye on how we can improve that going forward. China is an area which grows in importance in terms of financial services over time, so that's an area of focus for us to look to develop over time, for example. U.K., Europe, and U.S., I'm reasonably happy with the arrangements that we've got in place.
On ASP and pricing, I think, yeah, there's definitely the possibility in this market environment for a little bit of inflation-driven pricing. We're gonna keep a tight lid on our incentive spending. Fresh product is always a key driver for that. The DBX derivatives that Tobias talked about coming in will kind of give us the opportunity to maintain and build strong average selling prices. As we look forward a bit further into 2023 when we see the mid-cycle
Facelift of our sports cars, I think they give us a good opportunity to build the net revenue positions of those vehicles and further reduce the incentive spending.
There's some examples, you know, just having a new configurator, the traffic of hot leads to our customers, to our dealerships with the new configurator is almost 300% more, yeah. As well, the option take rate moves up as well. That's what we see. Now we have perfect data with us, so there are some opportunities to create some pricing dynamics, yeah. You know, then we have to follow everybody else, probably beginning of next year. We just did a price increase, yeah. Are we gonna do probably the next one, do probably a next step, but we have to be careful. Our sports cars are a bit overaged. We are now in a very healthy position because the stock is on the lowest level ever. Yeah, there are some opportunities. Yeah, absolutely.
Regarding efficiency, you know, it's a continuous improvement, but we did the major steps are done. We closed the paint shop. We merged the whole paint line into one paint line in St. Athan within five months, yeah. If you do that in a mass manufacturer, you need two years. That was really a fast transformation. Now we need to consolidate that everywhere so that we finally see all these outcomes. Then it's a continuous improvement steps, yeah. But it's perfect, you know. We started with 16 cars a day in Gaydon, now we are 22 per day, yeah, with the same assembly line, with more or less the same money. These are the improvements I'm chasing for.
It needs a time of consolidation, then we move into the normal, you know, continuous improvement journey.
Thank you very much.
Welcome.
We have the next questions coming from the line of Stephanie Vincent from JP Morgan. Please ask your question.
Hi. Thank you very much for taking my question, just from the credit side. Just back on questions for DBX. Excuse me, sorry. So you're talking about a full PHEV not taking place next year. Just wondering when you're doing your rounds on your potential customer base or marketing, I think it would be helpful just to contextualize, particularly for the DBX, what do you think the percentage of customers there are that actually are waiting for either a full PHEV version or a full electrified version that maybe you feel like that you're missing out on, if any?
My next question is on just supply chain constraints, and obviously, Aston's done very well, but just wondering about some of the issues that have cropped up over the past few months, such as magnesium, as well as there's been some labor issues read in the local press about potential DHL strike. Just wanting to know just some, I guess, qualitative comments around that would be super helpful. Thank you.
Okay. To your first question, yeah, further down the road, we're gonna have a plug-in hybrid, but it's a necessity. You cannot do everything, you know. Consider we are in that business with Aston Martin since a bit more than a year. We created a lot of new variants for DBX, which were really easy to do, and we have the hybrid technology transfer from Mercedes, our technology donor partner. So it needs a bit of time. Do we lose momentum on DBX by not having a plug hybrid? No. Yeah. This is where we're really confident. We oversee the market. We know who's the market leader. Lamborghini Urus is a market leader in some areas, in some regions without any hybrid.
It's you can lean on that for the next probably 12, 18, 24, two years, but then there is time to get a plug-in hybrid on the market. The Chinese product, purpose designed for China, is a mild hybrid, inline-six. It meets perfectly the expectation of our customers in China. We are creating bespoke vehicles for the different regions. To the supply chain, yes, for sure, it's an ambitious journey at the moment. It's one of the most ambitious times I ever experienced in my life in automotive. You know, you need to have a forecast of 6- 8 months to the companies delivering you the aluminum. It is not easy. We see a lot of disruption on the supply chain, like more or less everybody else. We are on top of that.
We take care. We broker chips. We are small. We can broker the chips always on the marketplace, no problem, and give that to suppliers to get things up and running. Yeah, it is. I don't know what I don't know at the moment, but we meet every day, two times a day and sort that out and get on top of that. So far, everything is sorted out. We have been always able to sort out the things and get on top of it. It's not gonna hit us. That's what we see at the moment.
Great. Thank you.
Okay.
We have the next questions coming from the line of Thomas Besson from Kepler. Please ask your question.
Thank you very much. I have a few questions as well, please. I'd like to start with the end markets by segment. Could you give us your view about the developments between SUVs on one side that seems to be still very dynamic and the sport and GT segment that had been kind of under pressure for the last couple of years? Do you think there is better momentum now and that the sports and GT-
Yeah
would rebound in 2022.
Yeah, you're right. I know all IHS forecast regarding sports, and I was surprised that it's better. I don't know why, honestly, but the IHS forecast tells you there is a bit of an improvement in that segment, and we see a strong demand on sports cars. In our product, you know, sales, retail and wholesale, it's kind of a 50/50, and sports cars are, in all honesty, doing better than we thought.
Okay. Thank you. That was my impression as well. Could you just clarify the comments you've made on the mid-cycle refresh for the different products? Is it still planned something around Q2 2023 for the DB11, DBS, and Vantage and a bit later on for the DBX, or is it
Yep
Somewhat later?
No. Exactly what you're saying. Yeah, end of Q1, beginning of Q2 is the phasing of the facelift and in 2023. Everything is on plan, on track for that. It's not just a facelift, it's a bit more than that. DBX is further down the road, yeah. That's a year later.
Okay. Thank you.
Now it's almost one and a half years later. Yeah. You need to have the car a bit longer on the marketplace. You cannot do a facelift after three years. The DBX came to the marketplace more or less last year. Now it's the first full year of DBX. A car normally need to be three years on the marketplace.
Okay. More 2024 then.
Yeah.
I mean, listening to your comment on PHEVs on the road, can you give us just a direction on the timeline for your first full BEV, when you want to show that to the market and when you eventually want to have that effectively sold to your customers? What should we think? Something around 2025, 2026 or?
Yeah. That's exactly that. Yeah. Exactly. Yeah.
Okay. Thank you. One last question about Formula One. Could you remind us the exact relationship in terms of who pays what, and what kind of use you can have from your participation in Formula One? Because there's been some very positive comments from Lawrence Stroll on the impact of using the Aston Martin brand. Could you remind us who's paying what in terms of sponsorship and what your company is getting from it?
Okay. Come back to that point. That's always a very good question because there are some misunderstandings out there. We have the Formula One business is a different ownership. That's a different legal entity, and it's almost privately owned by Lawrence and his consortium. Yeah. So that's a private company. We have a relationship with that company in a naming rights agreement, or put it as a sponsorship agreement. What we pay them is, it's a bit north of GBP 20 million a year, but it is a similar amount Aston Martin used to pay to Red Bull as a sponsorship agreement. Back in the days, it was a Red Bull Racing around the track.
Now it's an Aston Martin racing around the track with a similar amount of spending, which is really a very reasonable amount of money to get a full-fledged works team. It pays off for us in every perspective. You know, over the course of a weekend Formula One, you see more traffic on configurator, you see more traffic on the website. We are more in the media as Aston Martin has. We see partially the momentum, what we see on the marketplace is related to that Formula One engagement. It makes something with the brand as well. We are getting more sportier. Our Formula One edition of the Vantage is the highest retail order intake that we achieve at the moment. It's north of 50% retail order, 60%.
Yeah, kind of that way. It depends on the region. This is a no discount car, and it pays off for us in every perspective. We can meet. We did all the events in Silverstone, where we unveiled the Valhalla, was over the course of the Formula One. Just back in Austin, one of the last races, we met, I think, more than 100 or 150 customers. We showed the Valhalla there and yeah, it pays off for us really good. Really good. It's a win-win situation for everybody.
Yeah, thank you very much. I have one final small question, please, on the net financial interest, please. You raised the guidance for the P&L figure because of the Forex evolution. It seems to have no impact on the cash payments. Could you remind us why and whether we should anticipate eventually a higher cash interest payment in H1 2022 if currencies remain where they are?
You know, there's a, in Q3, there was circa just under GBP 30 million non-cash revaluation of the dollar debt, because pretty much all the debt is denominated in dollars. The dollar moved from circa 1.40 to the pound at the end of June to circa 1.35 to the pound at the end of September. You saw that effect. That's always going to ebb and flow every quarter depending on how the pound dollar exchange rate is, but it doesn't change the cash interest expense.
Okay. Thank you very much.
Thank you.
We have the next questions coming from the line of Christoph Laskawi from Deutsche Bank. Please ask your question.
Hi, good morning. It's Christoph Laskawi from Deutsche Bank. Thank you for taking my question as well. Two, please. The first one, it was on purchasing and that you are chasing price downs with the suppliers. Is there outside of the tech deal that you have with Mercedes also plan to partner a bit on purchasing, potentially increase the commonality of parts and with that leverage the scale towards the suppliers, and in that way you could additionally save on purchasing? The second one on geographic mix. You commented that the order book is quite strong across the regions.
Is there a plan to very actively steer the volumes in the regions outside of obviously the DBX picking up, especially in Asia and North America, which will increase the weighting of those two markets in your overall mix? Thank you.
When I understood you quite well, Christoph, you're talking about a partnership with purchasing of Mercedes or is that what you mean?
Yeah. I mean, you already have a tech deal with them. My question was outside of that, if you think about potentially setting up a partnership just on purchasing for specific parts which are currently not part of the deal in order to generate savings there.
We have always the opportunity to, you know, to go on to existing contracts or components with Mercedes, and we are moving more and more to a direct sourcing for suppliers in the Mercedes or almost AMG environment, and that's really good. Sometimes it makes no sense because we have different supply sets and different suppliers and different as well. Sometimes we have really better opportunities than in with the mass manufacturer supply sets. It's always a kind of trade-off. Coming to the point, no, we don't have a partnership with Mercedes. We're talking with them about some issues, and they're supportive. They're really supportive for that. You cannot, you know, motivate a large supplier to give us a better quote because Mercedes pushes these people there.
That's not gonna work. Then the motivation of these suppliers is sometimes not at the point where it would be needed from our side. I saw that before. It's not always helpful. We can use them a lot, and we use them a lot really, and that's helpful. What was secondly? Second one was-
Thank you.
was about market, was about sort of market mix and do we, you know, how do we see that? I think, you know, certainly for, you know, we've talked about how DBX is really important in markets that are predominantly bigger for SUVs. Obviously, China's a really important market for us to build into, and we're excited about the possibility of the derivative we've got for China that Tobias talked about and the opportunity that could give us to grow our share there. Obviously, North America's, you know, as everyone knows, a really big car market in absolute terms and a big SUV market. So we've seen through the course of this year, DBX build nicely in there.
Broadly, I think overall, we're keen to have our share region by region, car line by car line in each of those regions, and we think about it that way.
Great. Thanks, guys.
We have the next questions coming from the line of Gabriel Adler from Citi. Please ask your question.
Hi. Morning. Just one question left from me. I just wanted to come back to ASP because you talked about some pricing opportunities at the moment because of the inflationary environment. If we think about the roadmap to reaching that GBP 500 million midterm EBITDA target, increasing core ASP is going to be a key lever to achieving this. Taking a slightly longer term view, could you just help us understand what the next steps are from here to driving the core ASP higher over the next sort of 2-3-year period, in order to assist reaching that GBP 500 million target? Thank you.
Yeah, maybe I start and Tobias can build if I miss something out. I, you know, there's about 3-4 steps in building that core ASP, and you are right that getting to the medium-term guidance is supported by our thought process on that. For example, adding derivatives and improving market mix on DBX, which we plan to do over the next year, helps on the core ASP in terms of product mix. In terms of the mid-cycle freshening on the sports cars, you know, they give us the opportunity to reposition the sports cars somewhat upwards.
They give us the opportunity to include new technology and include a little bit of pricing for that technology for the content in the vehicles, and also gives the opportunity to include additional engine derivatives, which give us the opportunity to position one or other derivative a little bit higher in the range. In the fullness of time, adding in mid-engine sports cars into our lineup, which intrinsically have higher price points in the market also support at the margin, the development of the average selling price. There's a suite of those actions, all of which are in our plans to support the development of the ASP.
I think there is one important thing. On the long-term, midterm, as we discussed it many times now, we need to achieve a 20% EBIT margin level for that company. All the products, everything, what we are gonna build now for the future, all the programs where we sign off has to under-- they have to underpin that ambition. This is what you can expect, for example, from a mid-cycle or from a facelift of the sports cars. There are some opportunities because we're not talking just a bit of a facelift, it's more than just a facelift. This gives us the opportunity with, you know, much higher or different power outputs, things like that, to reposition the whole lineup of the sports cars. There are some pricing dynamics behind that.
As well, with the repositioning and with the facelift, we can get on a different level regarding our piece costs and costs of the bill of material as well. We do all the things in parallel.
Thank you.
Thank you.
We have the next question coming from the line of Richard Fallon from Deutsche Bank. Please ask your question.
Yes, hello. Also from the credit side. I think I may know the answer to this, but just to be sure, there was a story that the Formula One team is not moving ahead with a proposed retail bond for investment there. As you know, for the Aston Martin credit itself, are there any implications for that in terms of that investment program and potential efforts to help that?
Yeah, fair question, 'cause I understand the linkage with the name, but the short answer is no. There's no impact on Aston Martin because of what Tobias already explained about the contractual arrangement between Aston Martin, ourselves, the car company, and the separately owned Aston Martin Formula One team.
Totally two separate legal entities, a privately owned company doing the racing business. This is what you're talking about, the bond, and it's the PLC, which is a totally different company.
Thank you.
Totally different ownership.
Exactly.
on that, it's a PLC. Yeah.
The withdrawal of that financing, you know, there would be no contemplation that the Aston Martin business might look to support it 'cause they're two different entities.
Yep. Correct.
Got it. Thank you.
We have the next question coming from the line of Charles Coldicott from Redburn. Please ask your question.
Oh, thank you. Just a couple of follow-ups, actually. Firstly, on the Valkyrie Spider, I was wondering, was there any negative reaction from customers of the normal Valkyrie? Because presumably they weren't aware that there would be another 85 units of the new variant when they placed their original order. Then maybe a longer-term question on the hypercar market generally, do you see any risk of a bubble? Because it seems like you've increased your numbers of Valkyries, AMR Pros, Valhallas that you plan to produce, and you've got similar things happening at Lamborghini and Ferrari as well. You know, is there a limit to demand for hypercars? Clearly not at the moment because the Spider, for example, is oversubscribed.
You know, are we anywhere near the limit? The other thing I want to ask about, coming back to Formula One, can you just talk to us a little bit more about the option you have to purchase a stake in the F1 team? I know it's not on your radar right now, but you know, could you one day see yourself becoming a full F1 team? I suppose like Ferrari does, you know, developing innovations in the F1 car that eventually go into the road cars.
Okay. Valkyrie. No. Honestly, yeah, sometimes you get a call from a customer, "Why are you doing that?" Sometimes you end up with these customers that are gonna buy a Spider as well. Exactly, that's happened. Because we reached out, in the very first instance, we called all the 150 coupe customers and told them, "We're gonna do a Spider. Yes, probably we didn't tell you that at very first instance, but this is kind of a bit the business in that hypercar segment." We ended up that when many, I don't know the share at the moment, but I think it's 30% or so of the Spiders are now bought by coupe customers as well to get a collection. Similar with the track.
The track cars are almost bought by customers owning or buying a coupe as well. Is there hype? Yeah, the Spider at the moment is oversubscribed. We're just closing the final contracts with all the customers. You cannot do that every two years. You need to settle it down. A Valhalla is a total different level. Yeah. Valhalla is in the 700 kind of ballpark EUR thousand. That's a different car. That's not a EUR 2 million car. You have to be careful, and we monitor that market quite closely, and we know a bit the dynamic on that market. Formula One, I think, you know, there is a need probably that we have a long-lasting relationship with the Formula One team, which is a bit more substantial and more forward-thinking.
We are creative on that. Buying shares or something like that is not on the radar screen at the moment.
Thank you.
We have last questions coming from the line of Philippe Houchois from Jefferies. Please ask your question.
Yeah, thanks for having me back. Two questions. One is on China. We see the shift in politics in China because of prosperity politics. Now, all the companies I've spoken to in premium or luxury like Ferrari show no sign of any change in, you know, demand or even possibly an acceleration. I'm just wondering if you see that as well, or is there a risk that customers are ordering cars that might not be, they might not be able to buy later on? I'm just trying to get a sense of what...
'Cause potentially, you know, China was a big part of your midterm upside, and I'm just wondering if the change in politics might lead you to kinda revise how much traditional business might come from China over the next few years. Then I have a final one for you, Tobias, more on the electrification of cars. Are you gonna get into the mid-engine sports car business, in you know next two years or so? Technically speaking
Yes.
Can you actually make a proper or an electric version of a traditional mid-engine sports car that meets the criteria that a car needs to do in terms of dynamics and driving, or do those vehicles have to remain somehow ICE powered?
China luxury, I know what you're talking about. As far as we know and we see it at the marketplace, the answer is no, we don't see any impact at the moment. Yeah. This is the similar answer you get from everybody, I think, in the business. Let's wait and see. I don't know. We have to be careful. I know what they're doing, but at the moment, no. Even the forecast doesn't show anything. We know that the worst pocket in China, independently what happened now with the politics, is moving up anyway. Yeah. There still are, and everything is kind of crystal ball what we don't have. Mid-engine program, at the moment, I think honestly that you need kind of, for the next, probably that gonna last till 2030.
A mid-engine program, if you do that proper, you need. I think it's still lean on ICE, but you need that electrified powertrain. All the cars what we're doing now, Valhalla as well, Vanquish, they're gonna be electrified. A Valhalla, for example, is an ICE, but we have two electric motors in that car with each motor with 150 kilowatt. We have an electrical range of 15 kilometers, and then further down the road, Vanquish is gonna exceed that electrical range by another 10 or 15 kilometers. Yeah, that's the plan. On a and then you have to consider something like mid-engine platforms are always very modular. Yes, for sure, you can do a pure electric drive mid-engine, but I'm not sure where is the marketplace at the moment.
I don't see the demand for that in our GBP 200,000-GBP 600,000 or EUR segment at the moment for purely BEV-driven mid-engines. You need electrified, that's done. You need our electric-driven front axle. You need all-wheel drive. That's everything is in our plan. Yeah, aside to that, we started to create what could be a bespoke BEV for Aston Martin, where we can use the donor technology of Mercedes. That's on the plan, on the radar screen, and we do the engineering exercises around that.
Thank you very much.
You're welcome.
There are no further questions at this time. I'd like to hand over to Mr. Tobias Moers. Thank you.
We're gonna do the closing remarks. Thanks for joining us that morning. It was really good. Enjoyed your questions. I think Ken as well.
Mm-hmm.
I'm looking forward, and we're looking forward to keep you updated about our progress. The full year results will be published at the February, 24. Have a great day, and it was a pleasure. Thanks.
Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect your lines. Thank you.