Page last updated at 23:08 GMT, Tuesday, 24 June 2008 00:08 UK

Rolls-Royce and rivals face challenging times

By Jorn Madslien
Business reporter, BBC News

Rolls-Royce Phantom Coupe
Rolls-Royce says a string of new models should lead to sales doubling

Leaving the Goodwood factory in a Rolls-Royce Phantom Coupe it soon becomes clear that the world's most exclusive luxury carmaker is going the extra mile to attract ever more of the world's elusive super-rich.

"We've entered a completely new segment that is new for Rolls-Royce with this car," says Rolls-Royce Motor Cars chairman Ian Robertson.

The car is the fourth new Rolls-Royce to be unveiled since the marque was revived in 2003, and as such it is testimony to the company's willingness to continue taking risks.

And there will be plenty more models to come in the years ahead, including several derivatives of the forthcoming "Baby Rolls", codename RR4, he vows in an interview with BBC News.

British luxury car sales

"RR4 is likely to be a family of products," he says, and as such it will be crucial to secure further growth for the carmaker.

"We anticipate we will double our business, and some."

Priced at more than 300,000, the Phantom Coupe is notably sportier than its larger cousins, with a considerably more modern feel to its interior and with plenty more kick - even though it is kitted out with the same 6.7 litre V12 engine.

The car is essentially designed to attract super-rich customers who enjoy driving their own cars, rather than clients who have chauffeurs, and it shows.

Soaring sales

Rolls-Royce is not the only British marque catering for customers who sometimes pay more for their cars than many people pay for their houses.

And there are good reasons why.

Rolls-Royce Phantom Coupe, interior
The Phantom Coupe is targeted at clients who enjoy driving

"The overall car market is growing by 3-4% per year," explains Mr Robertson, "whereas the ultra-luxury car market is up hundreds of per cent in recent years."

It is a trend that has been mostly driven by England-based luxury manufacturers.

The smallest of the three, Rolls-Royce, saw sales rise from 300 cars during its first year, 2003, to more than 1,000 last year, a sign that the marque has at last re-established its credentials under BMW ownership.

Volkswagen-owned Bentley's sales have risen considerably faster during the last decade, from less than 1,000 in 1998 to more than 10,000 last year, buoyed in particular by its Continental models, launched soon after the formal split of the Rolls-Royce and Bentley companies.

Independent manufacturer Aston Martin's sales, meanwhile, rocketed from just 40 cars in 1994 to some 700 cars in 1998, before yet another tenfold increase during the following decade lifted sales to more than 7,000 in 2007.

Little wonder, then, that Aston Martin's chief executive, Ulrich Bez, looks confident as he shows off the company's gleaming factory and design centre in Gaydon, Warwickshire.

"We have started the rebirth of the English automotive industry," he tells BBC News. "We will reach about 10,000 by 2010."

Industry reborn

This remarkable revival of some of Britain's most famous automotive marques has done much to safeguard their heritage for future motoring enthusiasts.

It has all come about largely as a result of an unprecedented "arms race" in the automotive industry, when during the late 1990s and early 2000s, a number of carmakers invested heavily in upmarket brands .

Bentley Brooklands
Bentley's engines will be 40% more efficient in four years, and all the cars will be prepared for flex-fuel
Franz-Josef Paefgen, chief executive, Bentley Motors

The German carmakers were particularly active, with Daimler (at the time named DaimlerChrysler) relaunching the Maybach brand, Volkswagen gearing up the Bentley factory and BMW creating an entirely new plant to make cars under the Rolls-Royce banner.

But in spite of the recent strong sales figures, their investment amounted in several instances to costly mistakes, according to Mr Bez - an argument dismissed by the rivals in question.

"Millions was spent [by Volkswagen and BMW] on facilities and product development, and this is now sunk money," he insists, claiming that out of the three British luxury marques, Aston - which was sold by Ford last year for 479m - is the only one that is truly profitable.

"I would totally believe that the others are profitable at an operating level," he says. "But we are independent, we are not only profitable at the operating level, and we are not dependent on any other carmaker."

Emission rules

In many ways, that makes Aston Martin a particularly nimble operator.

And yet, its independence may also turn out to be its greatest weakness, as both Bentley and Rolls-Royce continue to roll out new models backed by their German parent companies' technological know-how as well as by their financial clout.

Ulrich Bez
We have started the rebirth of the English automotive industry
Ulrich Bez, chief executive, Aston Martin

But perhaps more importantly, both Rolls-Royce and Bentley have worked out strategies in response to forthcoming environmental regulations from Brussels. Rolls-Royce's relies on more efficient engine technology - jointly developed with others within the BMW group. Bentley pins its hopes on new engines that will also run on biofuels.

"We'll do what needs to be done, and more," insists Mr Robertson, who was recently promoted to BMW's management board. "We have a much better CO2 footprint than our rivals," he adds, pointing out that new, more efficient engines are on their way.

Bentley's chief executive Franz-Josef Paefgen, over lunch with journalists in London recently, insisted that "Bentley's engines will be 40% more efficient in four years, and all the cars will be prepared for flex-fuel".

Aston Martin has also taken great strides with regards to reducing CO2 emissions from its engines, according to Mr Bez.

"We have reduced our CO2 emissions by 23% in the last five years," he says.

But since Aston Martin is not a part of group and as such does not have access to small cars that can help pull down the overall fleet's average CO2 emissions, the forthcoming emission targets are set to be costly, and it will be a burden it must carry on its own.

Aston Martin DB9
Aston Martin is the only independent carmaker of the three

In essence, Aston Martin must either invest in or acquire fuel-saving engine technology, or it will be facing steep fines.

"In Europe, they talk about penalties," says Mr Bez. "But where will these penalties go?

"If it was about the environment, you would reduce the mileage driven," he argues, basing much of his strategy on a seemingly feeble hope that the politicians will change the rules and measure emissions on a yearly basis per vehicle rather than basing it on emissons per kilometre.

Plenty of customers

It is a paradox, albeit not particularly surprising, that the luxury carmakers' business plans have turned out more successful than doomsayers had predicted, only to come under fire from environmental regulation.

Not least since they are all reasonably optimistic about their abilities to weather the "perfect storm" in the financial markets.

And in a sense, their products are recession-proof.

"Chinese and Russian customers don't worry about Bentley's emissions," reflects Mr Paefgen, a sentiment echoed by Mr Bez.

"I only know there are a lot of people in the world who can afford to buy an Aston Martin, and I know that only 3-4% of them do," he says.

"Wealth is not going down. Wealth is still going up. There's still growth in the number of millionaires all over the world."

And if poverty is not about to hit the luxury carmakers' budget, what about people's perceptions about those who are prepared to flaunt their wealth in the midst of an economic downturn?

Not a concern either, according to Mr Robertson.

"Rolls-Royce isn't a car for someone who's not particularly confident, not prepared to be seen or who want to hide their success and wealth," he reasons.


SEE ALSO
Rolls-Royce chief joins BMW board
13 Mar 08 |  Business
Aston to unveil new design centre
11 Dec 07 |  Business
Aston Martin sold to UK-led group
12 Jun 07 |  Business
Rolls-Royce changes gear
04 Mar 07 |  Business
Rolls-Royce hints at broader range
05 Mar 06 |  Business
Bentley eyes small convertible
13 Sep 05 |  Business

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