Lamborghini today is a strong and fast-growing company. In the last two years, its already growing sales have literally skyrocketed as the firm took advantage of the SUV craze that dominates every segment of the automotive market.

LAMBORGHINI'S SALES FIGURES BY YEAR - 2011-2019

*2011-2018 - the numbers reported refer actual sales, not car deliveries, except for 2019 as the full-year annual report has not been published yet

Many automotive enthusiasts though also know that Lamborghini has a troubled history. After its initial fame sprang from the international success of the Miura, the majority stake was sold by Ferruccio in a moment of crisis in 1973. After this first sale, in around 20 years the company changed owners three more times up until 1998 when it was finally acquired by Volkswagen and placed under the Audi group.

From then on, the automaker started growing more and more steadily, affirming itself as one of the most iconic brands in the luxury performance segment. Despite being a low-volume manufacturer, it remains at the bleeding edge of performance and technological innovation.

HOW DID VW TURN THIS STRUGGLING COMPANY INTO THE SUCCESS IT IS TODAY? WHO WERE THE ARCHITECTS OF SUCH ACHIEVEMENT AND WHAT STRATEGY DID THEY ADOPT?

In 1993, Volkswagen Group Chairman and CEO Ferdinand Karl Piëch entered a company in serious financial distress. He was one of the main figures behind VW resurgence thanks to its aggressive international expansion strategy. He was also the decision-maker behind VW Group acquisition spree of 1998.

Investing a sum around today’s €2 billion (adjusted for inflation) in a single year, the German manufacturer acquired Rolls-Royce/Bentley (that was later split with BMW taking the rights on the Rolls-Royce brand), Bugatti, the engine manufacturer Cosworth and of course, Automobili Lamborghini.

The main reasons behind this strategy were consolidation, with wider market coverage, and Research & Development.

Along with VW AG’s then Finance chief and strategist Jens Neumann, the expansion plan served as diversification within the mobility sector. The interest was not diversifying for resilience purposes but covering as many market segments as possible to satisfy the highest number of customers.

*Audi R8

Also, the luxury and design expertise, as well as the technological know-how gained with these acquisitions, have been a huge contributor to VW’s strategy. To vitalise its product lineup and get Audi to compete in the same segment of BMW and Mercedes. That year two major additions were the new Beetle, showing a renewed, fresh design language, and the Audi TT premium yet sporty. The knowledge transfer became even more evident in the mid-2000s with the R8 which was taken straight from the Gallardo platform before, and from the Huracán later.

In a really concentrated industry, Piëch knew where to invest, even more considering his previous experience in the sports car segment with Porsche.

WHERE DID LAMBORGHINI START UNDER THE NEW MANAGEMENT?

The first new Lamborghini release under the Audi ownership was the Murciélago, with project manager Maurizio Reggiani and CEO Giuseppe Greco. Launched in 2001, in its first full year increased Lamborghini’s sales by 42%, with 442 units sold. Up until then, with the Diablo, annual sales were around 200 vehicles per year, but the model had already been around for over a decade. Murciélago was overall a big success for the company selling 4099 cars in a decade. The previous flagship, Diablo, reached only 2884 and the Countach before 2049.

*Lamborghini Gallardo

In an economy affected by the 2000s economic recession, Murciélago’s success was mainly due to improvements in its daily usability. Even today, car enthusiasts don’t appreciate much this performance ‘democratisation’ that for many took away Lamborghini’s true Italian soul. Murciélago was developed to offer improved performance, over its predecessor, but in a more sensible way. Reliability, practicality, dynamics, and drivability were the main differences. This philosophy gave Lamborghini access to a broader customer base.

The same concept was later adopted for the development of Lamborghini’s real game-changer: The Gallardo.

NEW OR OLD STRATEGY?

Audi was not the first to envision the little, more affordable Lamborghini destined for a wider market. This path was taken three times before, with the Urraco, the Silhouette, and the Jalpa.

Finally, an external factor that made the situation even more complicated was the fierce competition in the industry. Lamborghini’s main competitors at that time, Porsche and Ferrari, over the same period from the mid-70s to late 80s reached huge success with their respective models Porsche 911 Turbo (930) and Ferraris 308 and 328 producing around 20,000 units each.

A little later, it was Porsche also, that in the 90s on the brink of bankruptcy saved the day through the same formula. It is called Boxster and it was a huge hit right from the start. Naturally, the price was much lower than the Lamborghini’s that followed a few years later. 

It was more affordable around £50,000 less than the big sister in the UK, below £150,000. Under Audi’s supervision the final product was also more reliable and easier to drive, but still with a distinctive styling. These factors made Gallardo a huge success. In the first year, it sold an unprecedented 829 units for a total of 1,251 overall. The trend remained positive throughout the 2000s except for 2009 and 2010, where sales halved following the financial crisis.

Gallardo, anyway, went soon on to become the best-selling model of the Bull’s house, with 14,022 cars sold. The substitute, Huracán, in only 6 full years of production is likely to surpass this record (13,313 sold until 2018). The flagship V12 Aventador is already the best-seller of its line as well too.

Audi, in fact, created a perfect synergy. A strong and established design language, high performance and innovation are supplied with state-of-the-art technology and electronics which are some of the most difficult components for a small manufacturer to develop. To this, it has added also the ‘common sense’ of a mass manufacturer when it comes to drivability and everyday practicality.

WHAT ELSE DID LAMBORGHINI’S NEW MARKETING MIX INCLUDE?

Along with the core products and exclusive events, in recent years, numerous initiatives contributed to shaping the brand to what it is today.

From 2008, under Stephan Winkelmann and later with current CEO Stefano Domenicali, six different projects of limited editions or one-offs have been released. Reventón, Sesto Elemento, Centenario, Veneno, SC18 Alston, and Sián. Along with these, concepts like Asterion, Egoista, and Terzo Millennio. All these vehicles are powerful statements of technological and performance innovation.

*Some limited editions and concepts developed from the late 2000s at Lamborghini. From left to right in the gallery: Reventón, Sesto Elemento, Centenario, Veneno, Sián, Asterion.

A major strategic effort has been establishing Lamborghini’s presence in the Motorsport world. From the late 2000s, the newly founded Squadra Corse (Racing Team in Italian) overtook the management of all the motorsport activities, from the GT3 to the Lamborghini Blancpain Super Trofeo Championship. To the monomarque championship followed track-only versions of Gallardo first and Huracán after. Part of this plan regards also the road cars division, where Huracán Performante and Aventador SVJ (who took the record for the fastest lap at the Nürburgring Nordschleife for road-legal cars with 6:44.97) have been strongly (and successfully) advertised as cars developed to perform better than any competitors on the track. The successes of these models improved the reputation of the company beyond the recognition for the flashy looks and exclusivity of their cars. They made Lamborghini a serious competitor in its niche.  

Also, since the early 2000s, there was a consistent presence of the brand in important videogames, which left a lasting impression on a generation that has now grown up and counts numerous enthusiasts and potential buyers.

High-end merchandise has further expanded the products offering. Collaborations with lifestyle brands like Oppo with the Find X phone and important personalities such as star chef Carlo Cracco in 2011 further contributed to the Lamborghini’s marketing mix.

TO CONCLUDE…

VW Group is well-positioned in today’s market, with almost 11 million vehicles sold in 2019 but also for its strong commitment to technological innovation and electrification which affects Audi Group as well. This ensures a low-volume manufacturer such as Lamborghini to remain ahead of the changes with resources and up-to-date supplies.

Since 2010, the market has experienced unprecedented growth. But even now, in a slowing automotive market, Lamborghini’s strategy is working. The timing in releasing new models, as well as its improving reputation seem flawless. With the exception of Porsche, which came first both on an entry-level car and on the SUV market, Lamborghini itself has set the trend since the 2000s. Others like Ferrari followed releasing the Gallardo competitor California in 2009 at a similar price and lower than the mid-engine 458 Italia. Its outstanding success confirms Audi Group’s decision-makers’ ability in understanding this market and the likelihood of a continued positive trend, at least in the near future.

The long-awaited, leaked and reported SUV by Aston Martin finally dropped on November 20th, 2019. Can the DBX help Aston solve its difficult financial situation and get up again?

Everybody in the industry seems to agree on the fact that the SUV is the way to go in the current automotive market, regardless of your segment. And companies in the Luxury Performance segment have been working on it for quite a while. The DBX, in fact, has been in the working for over 4 years, and the same probably goes for Ferrari, whose Purosangue has been rumoured too for years, with concepts and news from unreliable sources.

*Aston Martin DBX

Sales figures from competitors strongly support this strategy. Two of the latest ones that arrived on the market clearly show the astonishingly fast-developing trend that continues in a slowing automotive market. Because the industry that peaked in 2017 with around 79 million vehicles sold has been slowing down for the past two years, with the biggest contributor to this slowdown being China. In 2018, the total number of vehicles sold globally decreased to 78.6 million, with China going from 24.7 million of 2017 to 23.7. Forecasts for 2019 claim sales of around 77 million, confirming the downward trend.

I am of course referring to Lamborghini’s Urus and Rolls-Royce Cullinan. Sales figures clearly show how in each quarter in 2019, every model’s sales decreased, while the two SUVs sometimes even more than doubled the overall company’s figures (Figure 1 and 2).

FIGURE 1 - LAMBORGHINI QUARTERLY SALES FIGURES BY MODEL - 2018 2019

FIGURE 2 - ROLLS-ROYCE QUARTERLY SALES FIGURES BY MODEL - 2018 2019

Similarly, other companies in the space such as Bentley and especially Porsche have been doing the same for a long time now. There are no official data on the quarterly sales for 2019 by model, but looking at previous years it is evident like every SUV model consistently accounted for a large share of each company’s sales (Figure 3 and 4). Regardless of the overall deliveries that have decreased steadily at Bentley, while growing at Porsche, SUVs maintain a way larger share of sales over any other model.

Product cycles must be kept into account as well. Bentayga’s sales have significantly decreased since its first deliveries that started at the end of 2015. Nonetheless, its importance remained crucial in Bentley’s lineup and the model has been refreshed with a Hybrid version whose deliveries have started in October 2019 and that represents an important milestone in the company’s history. Porsche’s Cayenne sales slowed significantly in 2017 as customers waited for a model refresh which arrived that year bringing the deliveries to a record in 2018. Overall the two German SUVs registered on average at least double the sales of each other model in the lineup.

FIGURE 3 - BENTLEY BENTAYGA SALES OVER TOTAL FIGURE 2016-2018

FIGURE 4 - CAYENNE AND MACAN SALES OVER TOTAL FIGURE 2016-2018

Thus, both the product and the timing for Aston Martin seem just right to save the day. With no other competitors arriving directly against the DBX in the same segment. The company from Gaydon has also a powerful marketing weapon arriving to strengthen its efforts at the best time possible: a new 007 film. ‘007: No time to die’ will be released on April 3rd, 2019, exactly when the DBX deliveries are set to start, which does not seem casual. Even though so far, it looks like the SUV will not be featured in the film, we know that four different models will: DB5, Vantage, DBS Superleggera, and the stunning Valhalla.

The fact that the company’s financial outlook seemed unchanged after the SUVs official unveiling though, can depend on several factors. Let’s have a look at what they could be and what are the risks connected with them.

The UK political and economic environment uncertainty. Even if, after the general election the political future of the UK seems much clearer, there are many factors whose consequences will be only evident in the medium term such as the import and export deals and tariffs. CEO Andy Palmer officially stated that Aston Martin Lagonda has already set its strategy to hedge the risks of a hard Brexit in the best way possible. Nonetheless, even if potential issues with the supply chain are avoided by relocating a large percentage of it within the UK, a stronger currency could hinder the company’s exports. Especially considering that Aston’s only growing markets in 2019 have been the US and China so far.

*Lamborghini Urus

Connected with this issue there could be problems arising from the pricing. As of now, the DBX is priced at £158,000 before options, which is higher than some direct competitors such as Bentayga V8 starting at £135,000, Cayenne varying from £70,000 to £125,000 (Macan from £50,000 to £70,000 is entirely set in a lower pricing segment). It is anyway slightly cheaper than the Bentayga W12 and the Lamborghini Urus, respectively sold at £162,000 and £165,000 but that offers both considerably more power, and way cheaper than the £250,000 Rolls-Royce Cullinan which is much more focused on a superior level of luxury. In each perspective, Aston Martin seems to have taken the most sensible choices possible, avoiding too bold or risky features, which could be good for an everyday luxury SUV like it is supposed to be, but with the chance of it going a bit unnoticed compared with its competitors.

A third factor potentially limiting the DBX's success could be its powertrain choice. Some experts have questioned the decision of using a turbocharged V8 for the SUV produced at the new plant in Saint Athan, Wales. The new factory was previously advertised as Aston Martin’s home of electrification with the new full-electric Rapid E and the two models incoming for the Lagonda brand. Thus, a hybrid powertrain could have been the best option to compete in the current crowded and environmentally-aware market where even all-electric like the Audi E-Tron become viable options, even if set in a premium segment and not a full luxury one.

Finally, even if unlikely right now, a gradual change of trend in customers’ preferences could limit the company’s ability to reach its 14,000 units target.

All in all, the DBX seems well-executed and has been received positively from a technical point of view so far. Its segment seems as hot as ever too. Still, it is early to say if the new SUV’s shoulders will be strong enough to support the entire company. The objective is ambitious and the risk factors are many. One thing is sure though, not many options were left at Aston Martin to save its name.

Rising numbers of young fans are sparking a Motorsport renaissance through social media. How does it happen? And can this wave favour car manufacturers?

Formula 1, referred to by many as the pinnacle of motorsport, in 2018 registered its second year in a row of audience increase and it has been the pinnacle of this new popularity surge.

With an increase year-over-year of 10%, it reached 490.2 million unique viewers. The top 20 countries by the audience even registered an average of +14%.

As in many other sectors, emerging markets in Asia accounted for a large share of such increase. India +87%, and China that tripled its audience since 2017 reached 68 million viewers becoming the second largest market for this sport after Brazil that counted 115.2 million. The total TV audience increased as well reaching 1.758 billion.

In 2018, across 'Western' social media (thus excluding Asian popular platforms such as WeChat and Weibo) its followers totalled 18.5 million. An astonishing +53.7% compared to the previous year that made Formula 1 the fastest-growing sport-related social media channel.

What started this change? The main input has come from Liberty Media. The American media company that at the beginning of 2017 finalised the acquisition of Formula 1 Group and the commercial rights of its Championship for US$4.4 billion.

Entrepreneur Chase Carey, who replaced Bernie Ecclestone as CEO of the Formula 1 Group, is applying a long-term plan and focusing on avoiding narrow-framing strategies that according to him were employed so far by the F1 management. There are several ways in which the new executive is trying to reignite the passion for this sport such as race calendar extensions and new regulations. One of the major efforts though is through the heavy employment of social media platforms.

The significant engagement and following increase evident from the two graphs above reflect such focus. YouTube and Instagram, second and fourth among the most used social media platforms in the world have an audience of over 2 billion and 1.2 billion people each. They are also the ones with the youngest and fastest-growing audience.

Carey himself in an interview for Financial Times exemplifies the rationale behind this new direction by highlighting how the internet offered the opportunity to create the "Shared Vision" for all the Formula 1 stakeholders. A vision in which teams, drivers, and especially the audience interact with each other is evolving every day and it represents the strength that no other communication means had before.

The opportunity to participate and have a real impact on the content produced instead of being a passive spectator is what is making all the difference, and these resources are being used impeccably. Not only to produce content but for engagement too. Publishing original videos and photos along with a mix of materials quoted from drivers and teams create that unique 'Shared Vision'.

Partnerships like the one with Netflix for the show “Drive to Survive” contributed as well to show the ‘more human’ side of the sport and enjoyed a good reception by its viewers.

The increasing importance of E-sports is also consistent with this vision, and the only way for everyone to participate in a sport that has prohibitive costs for the average F1 fan/enthusiast. It is particularly relevant also because it attracts almost exclusively a very young audience composed by Generation Zs. 5.5 million viewers, with around 80 percent of under 34, while for the actual sport the average is 40 years old. Such is its importance that for the 2019 season, every Formula 1 team in the Championship will have its own E-sport team representing it in the official competition.

The second crucial aspect of this communication evolution is live content. With such a massive continuous stream of uploads, trends become obsolete very quickly and this adds value to the live experience and its immediate fruition.

The priority then is to attract a new and young audience and F1 management thinks that “unique event content will continue to appreciate in value”.

Automakers involved in the Championship such as Alfa Romeo, Aston Martin (even if only through a partnership), Ferrari, McLaren, Mercedes, Renault, as well as OEMs like Pirelli and Honda are benefited indirectly as well by Formula 1’s popularity increase.

Audience data from the Formula 1 YouTube channel show a significant positive correlation with that of major luxury performance car manufacturers involved in the Championship. The graphs below display a regression of views data from the channels of two major manufacturers historically involved in the F1 Championship: Ferrari and McLaren. While the relation is evident for the views count, the result is not statistically significant for the channel subscriptions which may involve a stronger component of personal preference. Arguably, the synergy created by each member’s activity is beneficial for all the parties involved and worth the continued effort.

Formula 1 is the brightest example of this new business model in motorsport, but not the only one. Several other series such as MotoGP, FIA World Rally Championship, Indycar and FIA World Endurance Championship are applying the same kind of strategy with relevant results.

Social media looks very much like the most important tool to encourage the growth of motorsports that have been lacking audience traction in this decade. The upsurge is taking shape through synergies between individuals, automakers, OEMs, and institutions which with a varied mix of contents like videos, lives and online sports create the ecosystem that is so necessary to attract Millennials and Generation Zs today. 

‘Because I buy so many new Ferraris, at some point you run out of ideas. When I came to the idea of doing a spec to pay tribute to the 250 Lusso Competizione, then it made it a lot easier’ says Ferrari collector and entrepreneur David Lee (@ferraricollector_davidlee) in an interview while showing his Ferrari F12 TDF (standing for Tour De France which reference the so-called old cars race). Collaborating with Ferrari’s internal design centre he created a unique tribute to the historical 250 Lusso Competizione. The whole process lasted 6 months during which Lee and Maranello’s team designed a modern replica of the classic car’s specification, from the yellow livery with race stripes to the interior blue bucket seats with red harnesses, the small Italian flags, and many other details.

Lee’s car even received a customised plate installed inside.

David Lee’s collection embodies the ethos of a generation of luxury customers for whom a standard high-end product is just not enough. This trend is not exclusive to the automotive sector and is captured by the ‘Global Power of Luxury Goods 2018’ report compiled by Deloitte.

For luxury performance cars owners, colours and options choice add personality and value to the car itself but also to the collection as a whole, especially in the era of social media diffusion. Instagram user @gregb.23’s popular page is another great example of how customisation becomes a real personal signature with his collection immediately recognisable by the green and orange livery.

A research in Business Administration from the Michigan Business University highlights how the value creation of luxury brands’ products and marketing are increasingly shifting from product and firm-centered strategies toward more a personalised experience, where the whole creative process constitutes real value in itself. Thus, firms are compelled to change their traditional marketing strategies as well, developing a different culture of access and communication as well as physical infrastructures to finalise this process. ‘Armed with new tools and dissatisfied with available choices, consumers want to interact with firms and thereby “co-create” value’ (Prahalad & Ramaswamy,2004). In the context of this interaction then, consumers and companies assume a similar role and the market itself becomes a place of value creation (Fig. 1). 

As a consequence, firms are not just segmenting and targeting customers, instead develop a personalised experience for each one along with them. Demand for a product becomes contextual to the experience offered and the necessity for a firm to become highly responsive and adaptive to changing tastes through new functional and governance capabilities. This in turn, creates new competition and the need for investment and infrastructure development.

Another study by Apaka, Gögüs and Karakadilar presented at the 8th International Strategic Management Conference in Barcelona in 2012 showed how Brand Image and Flexibility, indicating customization varieties of the required brand model, are considered by far the most important factors  in the choice of a luxury vehicle. Through an Analytic Hierarchy Process they evaluated consumer preferences and identified these two characteristics with a weight of respectively 32 and 35%. Way above others like Quality or Performance (Fig. 2). 

Nowadays, it is being adopted even by automakers in ‘lower’ segments such as Mercedes or BMW that sell mostly mass-produced luxury models. In the low-volume luxury performance car industry, high-level personalisation has existed for a while. There are early adopters such as Ferrari that started almost from the very beginning during the 50s and Porsche with its Sondereunschprogramm, expanded in 1986, and renamed ‘Porsche Exclusive’.

But the competition is becoming fiercer. Between 2011 and 2015 in fact, almost all the major sports car manufacturers have expanded their infrastructure and services, Ferrari’s Tailor Made, Lamborghini’s Ad Personam, Aston Martin’s Q, McLaren’s MSO as well as the more luxury-oriented Bentley and Rolls-Royce.

As new trends emerge thanks to the latest technologies, each marque aims to offer the best experience possible to their clients who can easily end up spending from £50,000 to around £300,000 on options. Additional customisations now include special composite materials (usually stiffer and lighter textures obtained from carbon fibre processing), technical components like screens and integrated cameras, special design wheels, seats stitching, hued carbon fibre. On the experience side instead, between 2017 and 2018, along with refined boutiques where customers are welcomed, companies have started employing VR headsets to make the real-time customisation as immersive as possible or developing mobile’s app configurators.

This is important as the interaction across different digital platforms between customers and brands will become even more common according to Accenture at the Millennial 20/20 Summit in London, and Deloitte’s report. By 2025 millennials and generation Z will account for over 40% of the global luxury market and the focus on technology and connectivity will likely be the next important trend where the competition will develop for luxury performance cars as well.