Fernando Alonso’s podium in the recent Bahrain Formula One race has given Aston Martin (LSE: AML) shares a boost.
After being fastest in practice, Alonso overtook seven-time world champion Lewis Hamilton during the race.
Pundits are even claiming Aston Martin could challenge championship contenders Red Bull and Ferrari this season.
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This recent success is powering the brand’s share price. It has nearly doubled so far this year and experts predict the podium could have added $400m to the company’s value. The share price has leapt up to 30% compared to before the race weekend.
If there is more to come, could this be a good season for Aston Martin and its shareholders?
Aston Martin – beyond Bond
It is certainly an exciting new chapter for the Aston Martin brand that could win a new generation of fans. To date, the 110-year-old carmaker has been synonymous with James Bond, particularly its historic models.
But involvement in F1 brings it bang up to date. More than 60% of customers are new to the brand, partially through its racing strategy. Its F1 fanbase totals 150m people. Importantly, test drives are up more than 60% in key markets.
Last year, Aston Martin’s revenues were up 26% and the average selling price exceeded £200,000. Many of its models are sold out for 2023.
After around 6,400 sales in 2022, it is targeting 7,000 this year and 10,000 in the longer term.
This all seems like a winning proposition, which is vital to securing ongoing investment for model updates, marketing, and new launches.
The price of success
But winning costs money. So does keeping up with the pack in a fast-changing automotive market.
Revenues of £1.4bn in 2022 were eaten up by production costs, investment, overheads, and interest. This left the business with a full-year loss of £527m, nearly three times higher than 2021.
Electrification will also prove a challenge, as Aston Martin guides petrol-heads to a new high-performance portfolio as the world switches vehicle fuels.
Its first plug-in hybrid, the Valhalla, starts deliveries in 2024 and the first fully electric model should arrive in 2025.
With many countries looking to ban the sale of new fossil-fuelled powered cars by 2035, the race is on to remain relevant and exciting.
Age and experience
There is also the unpredictable nature of F1 to consider. Leaders can be turned into laggards in a few races, such is the frantic pace of development during the season. Furthermore, star driver Fernando Alonso is the oldest on the grid at 41. This is beyond retirement age in such a demanding sport.
His huge experience is a key factor in the team’s success. He is a two-time world champion from his time racing with Renault. He also won the Le Mans 24-hour Race twice. He has hundreds of podiums, pole positions and fastest laps to his name.
These are big shoes to fill for teammate Lance Stroll, the son of the F1 team owner, should the time come.
Aston Martin is on an exciting and transformational journey. But as a long-term investor, and given the risks involved, I plan to be a spectator and invest elsewhere. I will still follow the F1 team though. And if my portfolio delivers in the long term, hopefully I can invest in one of its amazing road cars in the future.
