While F1 folk are getting excited about Sebastian Vettel paying his first visit to Aston Martin Racing (formerly known as Racing Point), with a short haircut, the main company’s financial situation remains difficult. Lawrence Stroll and his fellow investors own stakes in both companies and the racing team has been rebranded to promote Aston Martin – but they are separate entities.
For those who are watching these things, the Aston Martin share price is pretty volatile. It is not long ago that the shares were trading at £19, which put the market cap at £4.3 billion. But in the course of 2019 they fell gradually to £10 and then dropped sharply in the autumn, when the company issued a profit warning. Then in 2020 COVID-19 arrived and things got even worse. Today the shares are worth £1.85, although the issuing of new shares has meant that the market cap of the firm is £2.13 billion. The company also has considerable debt (around £1.2 billion) although when it comes to the enterprise value, with debt and cash added to the share value, it is still reckoned to be worth around £4 billion, which is what someone will need to pay to acquire it.
This morning there was an interesting story from China’s East Money, a website that watches the financial markets, which suggested that the China’s BYD Auto Company is preparing to acquire the Aston Martin car company, in a deal that would value the British firm at £4.1 billion.
BYD (which stands for Build Your Dreams) started out as a company producing rechargeable electric batteries. Today it is the largest supplier of rechargeable batteries in the world. It bought the Tsinchuan Automobile Company in 2002 and while its current range includes electric vehicles, plug-in hybrids and petrol-engined vehicles, it has always been a company that aims to build electric cars. Last May the firm announced plans to expand into Europe with an SUV and a range of commercial vehicles.
It also has a joint venture with Daimler to produce luxury electric cars using the Denza brand. It should be remembered, of course, that Daimler will have a 20 percent of Aston Martin by 2023 in exchange for an engine supply deal.
It should also be remembered that at the start of 2020 Geely and the battery manufacturer CATL both looked at acquiring Aston Martin, but lost out to the Stroll consortium. However since then it has not been an easy ride for the car company, although much depends on the sales of the Aston Martin DBX, the company’s first SUV.
Things have also been changed somewhat by the British government’s announcement in October that it plans to ban the sale of petrol and diesel cars by 2030, forcing car manufacturers to develop electric models. Some hybrids will be allowed to be sold until 2035, but that’s it. This may kill the British car industry in its current form.
Of course, if Aston Martin is switched over to producing high-end electric cars, its involvement in Formula 1 would make very little sense in the long term, although no doubt the sport will move towards more hybridisation in 2025 and perhaps to full electricity in 2030 or 2035.
What happens to Formula E at that point is not clear…
But, who knows? Maybe East Money isn’t right.