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Will the 2016 Aston Martin Vanquish Beat Ferrari With Mercedes' Help?

The V12 that powers the hot Aston Martin Vanquish is unique to Aston, but it's built by Ford in Germany. The next Vanquish will likely have an engine designed with Mercedes' high-performance AMG group. Photo credit: Aston Martin Lagonda Ltd.

James Bond will be getting a new ride soon -- and that new ride will be powered by an all-new engine, created with some help from Mercedes-Benz.

Tiny British supercar maker Aston Martin this week announced details of its tie-up with German automaker Daimler (NASDAQOTH: DDAIF  ) , first revealed earlier this year

In exchange for an equity stake in Aston, Daimler's high-performance Mercedes-AMG group will work with the British firm to design and build a new range of V8 engines. Those V8s will power the next generation of Aston Martin's luxury sports cars. 

It's a huge deal for Aston Martin, which is the only global high-end automaker that isn't tied to a giant global automaker. And it's a good deal for Daimler, too. 

A cutting-edge V8 to power future Aston Martins
Under the deal, Mercedes-AMG will work with Aston Martin to develop "bespoke" -- that is, unique to Aston -- V8 engines that "will incorporate cutting edge technology" and combine "high performance and fuel efficiency."

No cash is changing hands in this deal. Instead, Daimler will receive non-voting shares in Aston Martin, up to a 5% stake in several stages. Daimler will also have an "observer", a nonvoting representative, on Aston Martin's board. 

It's clear what Aston gets out of this: cutting-edge new engines developed by a partner with impeccable luxury-performance credentials. Aston Martin desperately needs those engines, but doesn't have the resources to develop them on its own. 

Aston Martin was once owned by Ford (NYSE: F  ) . Its current engines, a V8 and a V12, were developed with the help of other parts of Ford's global organization. Ford sold Aston Martin to a group of private investors in 2007, but Aston's engines are still built in a Ford factory in Germany. 

But Ford's contract to build Aston's engines is coming to an end. That left Aston scrambling for replacements. Aston Martin is the only global boutique luxury carmaker without a big corporate parent, and it lacks the massive resources needed to engineer and build a modern, high-tech engine on its own.

That left Aston at a disadvantage to all of its key rivals. Ferrari and Maserati are controlled by Italian auto giant Fiat (NASDAQOTH: FIATY  ) , Bugatti, Bentley, Lamborghini, and Porsche are all part of the Volkswagen (NASDAQOTH: VLKAY  ) empire, and Rolls-Royce is owned by BMW (NASDAQOTH: BAMXF  ) . All of those brands have access to their parents' advanced technology and resources, critical for survival in a world where emissions and fuel economy are becoming ever more important. 

Now, Daimler has agreed to take on at least part of that role for Aston Martin. But what does Daimler get out of this? 

Why this is a great deal for Daimler, too
In a world where luxury brands of all kinds are seeing unprecedented growth, Daimler gets a stake in a brand that sits near the top of the luxury-car heap in terms of cachet -- and that has a whole lot of room for growth.

Aston Martin sold about 3,400 cars last year, but is hoping to roughly double that to 7,000 a year by 2016, according to a Bloomberg report. Booming demand for luxury cars in Asia and North America makes that target seem reasonable -- if Aston can muster the products and resources to take advantage. Daimler's help makes that goal attainable, and should profit both parties. 

Aston's growth is an opportunity for Daimler in other ways. Here's one great thing that Daimler will surely get out of the deal: access to Aston Martin's customers. Aston Martins probably compete with a few high-end AMG Mercedes products, but, for the most part, the two brands complement each other rather than compete directly.

Recently refreshed, Aston Martin's stunning DB9 remains a design landmark. Even in understated silver, few cars are as striking in person. Photo credit: Aston Martin Lagonda Ltd.

Think of it this way: What do all Aston Martin customers have? Money and an interest in cars. That makes them ideal prospects for Mercedes' higher-end offerings. Aston Martin fans might well choose a Mercedes (or two, or three) as a daily driver to complement the Aston Martins in their garages. 

Beyond that, one can easily imagine several profitable ways in which this partnership could expand: An Aston Martin SUV, for instance, developed with Mercedes' help and pitched to the super-rich in places like China and the Middle East, could prove a very profitable product -- and again, one that expands Mercedes' reach, as well.

(Before you laugh at the idea of an Aston Martin SUV, consider this: About half of Porsche's global sales this year, and a big chunk of VW's profits, will come from the big Cayenne SUV. Diehard Aston enthusiasts will howl with outrage, but done right, this is an enormous opportunity.)

The upshot: Aston Martin takes a big step closer to Ferrari
In this part of the global auto market, Ferrari is the king. Only Ferrari talks in terms of limiting supply, rather than sales growth; only Ferrari can imperiously make ultra-wealthy customers wait a year or more for their cars, and jump through outrageous hoops for access to limited-run models; and only Ferrari can generate profit margins that would make even Elon Musk blush.

Aston will never be Ferrari, if only because it will never match the tremendous racing success that has given Ferrari such value. But with its gorgeous designs, near-bespoke construction, and the enduring connection with the revitalized James Bond franchise, Aston has considerable cachet of its own.

With a little help from Daimler, it just might be able to give Ferrari a run for its money.

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  • Report this Comment On December 31, 2013, at 1:40 AM, Davessworks wrote:

    It's hard to imagine that Aston Martin will put a V8 into the Vanquish versus a V12 however Mercedes has not agreed to provide V12s to AM and it's not clear whether Mercedes will continue to develop V12s further themselves.

  • Report this Comment On January 01, 2014, at 7:02 PM, Davessworks wrote:

    Just a quick follow-up. AM extended their supply deal with Ford for 5 years back in June 2013. I can only assume that this means they will develop new cars for Mercedes power plants. The only way to truly compete with Ferrari and the like is to go mid engine if their constrained to 8 cylinder cars. I think such a transition about tear at the very soul of Aston. Interesting times ahead, as always.

  • Report this Comment On February 06, 2014, at 4:32 PM, TMFMarlowe wrote:

    I think a properly over-the-top BIG supercharged V8 would make a fine powerplant for Aston Martin. The V12 is a recent thing; Aston built its rep on sixes and V8s. V12s are lovely, but they aren't necessary. Porsche seems to do just fine with flat-sixes. And I completely, utterly reject the idea that they would have to go to a mid-engined design just because that's what Ferrari does.)

    John Rosevear (who used to own one of those Tadek Marek V8s, and who remains an AMOC member)

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