The year 2022 will go down as the most contradictory in the 103-year history of Bentley.
As CEO Adrian Hallmark put it on Wednesday, it’s been the British carmaker’s most successful and biggest crisis year. He recounted brushes with disaster that Bentley’s managed to sidestep on its way to record sales and profit. And he alluded to why other UK manufacturers won’t be so fortunate, delivering a bleak assessment of damage done by Brexit and the future of the industry as it goes electric.
In short, when one is selling vehicles for about €220,000 (roughly R3,9m) on average, one can afford to pay an electricity bill that’s quadrupled, attract and retain a workforce in the face of a disconcerting labour shortage and import a relatively small number of expensive batteries that increasingly will replace domestically built combustion engines.
“Not all of what we are experiencing is because of Ukraine,” Hallmark said of post-Brexit UK. “That has definitely compounded the problem, but there is no question that directly or indirectly pushing hundreds of thousands of productive, willing workers out of the workforce has led to shortages in hospitality, in logistics, in all kinds of industries, and in itself, it reduces economic activity.”
Bentley has risen above all the morass by mastering the art of selling over-the-top opulence.
The manufacturer used to be too willing to let dealers dictate which cars it produced and too often settled for simple-spec models. Now that its well-heeled clientele has more say in what’s rolling off assembly lines, pricing per vehicle has shot up.
Previous management apparently took for granted how willing its customers were to splurge on high-gloss, dark fiddleback eucalyptus accents around their air-conditioning vents (a R34,696 option,) or “3D wood” door inserts (R210,772), thank you very much.
Do R1,5m seats sound a bit steep? Maybe not if you have a hankering for handcraftsmanship (712 stitches go into each diamond sewn into the highest-end Mulliner models).
As successful as Bentley’s rethink has been — the company started the year with its best order book ever, double what it was at the beginning of 2021, which had been a record — Russia’s invasion of Ukraine was an almost calamitous event. The manufacturer depends on the latter country for wire harnesses that, in a worst-case scenario, it was going to have to go without for as long as six months.
“To put that in context, that would have been three to four times the length of closure that we had to do for Covid,” Hallmark said. “And if you shut down for four or five months, you’re basically bankrupt.”
The assemblers of those components in Ukraine ended up working nights in blackout conditions. Staff carried on despite occasionally needing to seek shelter in underground bunkers and Bentley “never lost a single part,” Hallmark said.
Then came China’s sporadic lockdowns, including in Shanghai. From there, Bentley “ironically and unbelievably” sources three semiconductors that were part of the wiring looms made in Ukraine, Hallmark said. When the city closed down for about four weeks, the automaker had no way of getting in touch with anyone and was down to just three weeks of stock in the pipeline.
Despite the subplot of constant chaos, Bentley has the capacity to produce about 15,000 cars and has managed to hit that this year. It won’t push those boundaries in 2023, Hallmark said, in part because orders from China have slowed.
That's not to say the company is shying away from investment. It will plough £2.5bn (roughly R52m) to £3bn (roughly R63m) over the next six years into its manufacturing complex in Crewe, England, which will go through a reinvention befitting the radical overhaul of its product line-up. By 2026 Bentley will offer only plug-in hybrid and fully electric cars. By the end of the decade it will complete the switch to vehicles powered entirely by batteries.
As crucial as batteries will be to Bentley’s future, it doesn’t need a factory for them in the UK, according to Hallmark. The cost of shipping them in from elsewhere will be manageable and it can do so in a carbon-neutral way, he said.
The broader UK car industry, on the other hand, could be in trouble. It’ll be difficult to import batteries in bigger volumes because they cost about six times what engines do. The amount of downsizing that’s occurred in auto assembly also works against the business case for battery suppliers to swoop in.
“If you think of the manufacturers in the UK, there’s not sufficient critical mass,” Hallmark said. “You’ve got not enough production in the UK — not only for batteries, by the way, but for many other major components. You don’t have enough critical mass of a ubiquitous-design cell to get the economies of scale that you need.”
More stories like this are available on bloomberg.com
Bentley paints bleak picture for rest of Britain’s car industry
Image: Bloomberg
The year 2022 will go down as the most contradictory in the 103-year history of Bentley.
As CEO Adrian Hallmark put it on Wednesday, it’s been the British carmaker’s most successful and biggest crisis year. He recounted brushes with disaster that Bentley’s managed to sidestep on its way to record sales and profit. And he alluded to why other UK manufacturers won’t be so fortunate, delivering a bleak assessment of damage done by Brexit and the future of the industry as it goes electric.
In short, when one is selling vehicles for about €220,000 (roughly R3,9m) on average, one can afford to pay an electricity bill that’s quadrupled, attract and retain a workforce in the face of a disconcerting labour shortage and import a relatively small number of expensive batteries that increasingly will replace domestically built combustion engines.
“Not all of what we are experiencing is because of Ukraine,” Hallmark said of post-Brexit UK. “That has definitely compounded the problem, but there is no question that directly or indirectly pushing hundreds of thousands of productive, willing workers out of the workforce has led to shortages in hospitality, in logistics, in all kinds of industries, and in itself, it reduces economic activity.”
Bentley has risen above all the morass by mastering the art of selling over-the-top opulence.
The manufacturer used to be too willing to let dealers dictate which cars it produced and too often settled for simple-spec models. Now that its well-heeled clientele has more say in what’s rolling off assembly lines, pricing per vehicle has shot up.
Previous management apparently took for granted how willing its customers were to splurge on high-gloss, dark fiddleback eucalyptus accents around their air-conditioning vents (a R34,696 option,) or “3D wood” door inserts (R210,772), thank you very much.
Do R1,5m seats sound a bit steep? Maybe not if you have a hankering for handcraftsmanship (712 stitches go into each diamond sewn into the highest-end Mulliner models).
As successful as Bentley’s rethink has been — the company started the year with its best order book ever, double what it was at the beginning of 2021, which had been a record — Russia’s invasion of Ukraine was an almost calamitous event. The manufacturer depends on the latter country for wire harnesses that, in a worst-case scenario, it was going to have to go without for as long as six months.
“To put that in context, that would have been three to four times the length of closure that we had to do for Covid,” Hallmark said. “And if you shut down for four or five months, you’re basically bankrupt.”
The assemblers of those components in Ukraine ended up working nights in blackout conditions. Staff carried on despite occasionally needing to seek shelter in underground bunkers and Bentley “never lost a single part,” Hallmark said.
Then came China’s sporadic lockdowns, including in Shanghai. From there, Bentley “ironically and unbelievably” sources three semiconductors that were part of the wiring looms made in Ukraine, Hallmark said. When the city closed down for about four weeks, the automaker had no way of getting in touch with anyone and was down to just three weeks of stock in the pipeline.
Despite the subplot of constant chaos, Bentley has the capacity to produce about 15,000 cars and has managed to hit that this year. It won’t push those boundaries in 2023, Hallmark said, in part because orders from China have slowed.
That's not to say the company is shying away from investment. It will plough £2.5bn (roughly R52m) to £3bn (roughly R63m) over the next six years into its manufacturing complex in Crewe, England, which will go through a reinvention befitting the radical overhaul of its product line-up. By 2026 Bentley will offer only plug-in hybrid and fully electric cars. By the end of the decade it will complete the switch to vehicles powered entirely by batteries.
As crucial as batteries will be to Bentley’s future, it doesn’t need a factory for them in the UK, according to Hallmark. The cost of shipping them in from elsewhere will be manageable and it can do so in a carbon-neutral way, he said.
The broader UK car industry, on the other hand, could be in trouble. It’ll be difficult to import batteries in bigger volumes because they cost about six times what engines do. The amount of downsizing that’s occurred in auto assembly also works against the business case for battery suppliers to swoop in.
“If you think of the manufacturers in the UK, there’s not sufficient critical mass,” Hallmark said. “You’ve got not enough production in the UK — not only for batteries, by the way, but for many other major components. You don’t have enough critical mass of a ubiquitous-design cell to get the economies of scale that you need.”
More stories like this are available on bloomberg.com
READ MORE:
BMW fined by UK watchdog
VW retools main german factory to make more electric cars
Tesla investors have a message for Musk: stop wasting time on Twitter
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most read
Latest Videos