Aston Martin scraps Cygnet city car after dire sales

By Rhys Jones and Kate Holton

LONDON (Reuters) - Aston Martin (:ASTON.UL) has abandoned its attempt to tap into the popularity of so-called city cars after selling fewer than 150 of its "Cygnet" model, an embarrassing blow to the struggling 100-year-old British luxury sports car maker.

A source close to Aston Martin said its two-door Cygnet, which started production in 2011 based on the Toyota (:77203.T) iQ but was marketed at three times the price, had been dropped from the company's line-up after dismal sales of the 32,000 pound ($51,500) vehicle.

Aston had hoped to sell up to 4,000 Cygnets a year to environmentally conscious city dwellers thought to be keen on a small, easy to park, luxury vehicle. But buyers were put off by the Cygnet's high price, particularly since it lacked the characteristic performance of a brand that achieved fame with the DB5 sports car featured in 1960s James Bond movies.

"The Cygnet was intended to catapult the brand into a new market but at roughly double the price of many competing cars in that segment, it was misjudged by Aston Martin," said Ian Fletcher, an automotive analyst at research consultancy IHS.

"The premium supermini market is a good place to be at the moment but Aston got it wrong in thinking putting a grill and a fancy interior on what was basically a Toyota iQ would make people buy it."

European carmakers have recently done well out of producing high-end micro cars. Audi's upmarket A1 supermini is selling well, while Mercedes is considering making a luxury supermini to take on BMW's (XETRA:BMW.DE - News) successful Mini. Research consultancy IHS forecasts some 594,000 city cars will be sold across Europe in 2013 and expects this to grow to around 803,000 by 2020.

However the popular BBC program Top Gear and other car websites suggested that Aston ventured into the city car market to help it meet EU targets for fuel emissions and to justify the development of V8 and V12 engines for its high powered cars such as the DB9 and Vanquish models.

Aston Martin was not immediately available to comment.

LATEST BLOW

The luxury car maker, owned by Kuwaiti and Italian private equity groups, has struggled to grow since the economic downturn in 2008. Failing to find success when the luxury sector is growing rapidly does not bode well for Aston Martin, which also lacks a luxury SUV model - excluding it from another market that has defied Europe's recession.

Its weakness has been exacerbated by a lack of funds from its private equity owners, which include Investment Dar - a major Kuwaiti finance company which ran into trouble during the financial crisis and had to restructure $3.7 billion worth of debt. By comparison UK rival Jaguar Land Rover has enjoyed more than 4 billion pounds of investment since being bought in 2008 by India' deep-pocketed Tata Motors (NSE:TATAMOTOR.NS - News).

As a result Aston Martin's sales and profits are on the slide. It reported 2012 adjusted pretax losses of 24.6 million pounds, down from the 21.2 million pound loss it posted a year earlier. It also took an 8.5 million pounds charge related to scrapping Cygnet.

Retail volumes fell to 3,800 units in 2012, from 4,200 a year earlier, but Aston is aiming to double sales by 2016, helped by new V8-engine versions of the Vantage and DB9 models.

Those numbers stand in stark contrast to Bentley, which reported a 30 percent rise in 2012 sales, helped by new showrooms and growth in the United States and particularly China, with its large number of super-rich consumers as well as a fast-growing middle class eager for luxury western items.

Aston's withdrawal from the supermini market is particularly disappointing after Italian private equity fund Investindustrial agreed to buy 37.5 percent in the carmaker last year and raised hopes that its promise to invest $1 billion in new products and technology would boost Aston Martin's fortunes.

The Gaydon, Warwickshire-based company also teamed up with Daimler's (DAIGn.DE) high-performance Mercedes-AMG GmbH division to develop a new generation of bespoke V8 engines. That move, taken earlier this year, aimed to help it better compete with the likes of Volkswagen's (VOWG_P.DE) Bentley and Porsche units, as well as Jaguar Land Rover, which has achieved strong sales growth, especially in China, since 2008.

Both of those deals should help Aston Martin overcome its latest blow, analysts said.

"Investindustrial turned around motorcycle maker Ducati who were in trouble and have a similar history to Aston so their involvement is a huge positive, while the Daimler relationship can only help develop the technology under the skin, which is key," said IHS's Fletcher.

Meanwhile the British brand's next challenge may be just around the corner. Media reports suggest its charismatic CEO Ulrich Bez is set to step down at the end of the year after 13 years at the helm and with no clear successor.

($1 = 0.6219 British pounds)

(Editing by Sophie Walker)

Most Viewed

  • Dum Laga Ke Haisha Star Bhumi Pednekar Has Lost Weight!
    Dum Laga Ke Haisha Star Bhumi Pednekar Has Lost Weight!

    Bhumi Pednekar made her Bollywood debut opposite Ayushmann Khurrana in Dum Laga Ke Haisha doesn’t actually look even tiny bit close to her character from the movie. The reason why we didn’t see Bhumi come in front of media to interact, as her character and role in the film was kept a secret from audiences. …

  • Swine flu hits Sonam, Vidhu Vinod Chopra & family
    Swine flu hits Sonam, Vidhu Vinod Chopra & family

    Actress Sonam Kapoor who was diagnosed with swine flu on Friday was moved to Kokilaben Ambani Hospital in Mumbai. …

  • Sunny Leone does a Zeenat Aman; wears transparent saree!
    Sunny Leone does a Zeenat Aman; wears transparent saree!

    T-series' upcoming film EK PAHELI LEELA has been creating buzz for quite some time now. …

  • When Sonam Kapoor Crashed Out On The Sets Of Prem Ratan Dhan Payo
    When Sonam Kapoor Crashed Out On The Sets Of Prem Ratan Dhan Payo

    Seems like Actress Sonam Kapoor is having her hectic schedules these days. She is been shooting in Gujarat with actor Salman Khan for their next film of Sooraj Barjatya’s Prem Ratan Dhan Payo. Take a look at the photographs of Sonam Kapoor, she just crashed out, looking so comfortable, she took a quick nap on the sets of Prem Ratan Dhan Payo. Sonam Kapoor has been attending various events and award shows and equally she is managing her shooting of her upcoming movie Prem Ratan Dhan Payo with …

  • Sunny Leone Recreates Zeenat Aman’s Hot Look!
    Sunny Leone Recreates Zeenat Aman’s Hot Look!

    For her upcoming film Ek Paheli Leela, Sunny Leone has recreated Zeenat Aman’s iconic look from Satyam Shivam Sundaram where she’s shown to be wearing a white sari. Elaborating on the look, director Bobby Khan says, “The way SSS captured Zeenatji’s beauty was beautiful. When I bounced the idea off Sunny, she immediately approved. Our film has glamour but we’ve kept Indian sentiments in mind, which is why she wore a spaghetti top with her sari.” Directed by Bobby Khan starring Sunny Leone, …

  • Oops! Sonakshi Sinha Does It Again!
    Oops! Sonakshi Sinha Does It Again!

    Sonakshi Sinha never goes out looking for trouble, because trouble usually finds her. The actress broke her hand again! Sonakshi Sinha took to her Instagram account and posted a picture of her injured hand, wrapped in pink bandage. Last night, on Friday, Varun Dhawan threw a Badlapur success bash and the actress, like a good and supporting friend, made it to the party, even with her broken hand. …

  • Why Is Salman Khan Sniffing Camphor And Cinnamon?
    Why Is Salman Khan Sniffing Camphor And Cinnamon?

    We had recently reported that Sonam Kapoor has tested positive for Swineflu, and after spending a brief period at Sterling hospital in Rajkot, she has been moved to a suburban hospital in Mumbai. After Sonam was diagnosed on the sets of Prem Ratan Dhan Payo, the crew has obviously been on high alert and everyone has been tested. The team is currently shooting in the garden owned by Maharani of Gondal, Kumud Kumari. …

  • Ab Tak Chhappan 2 Movie Review
    Ab Tak Chhappan 2 Movie Review

    AB TAK CHAPPAN 2 is an 80s plot with a 90s twist with director Aejaz Gulab trying to give it a current flavor. It doesn't work. Nana Patekar is at his blistering best... …

Loading...