Rolls-Royce has to deal with the recession like the rest of us, but a 'baby' model should help widen its customer base, writes Olive Keogh
THE CHIEF executive of Rolls-Royce, Tom Purves, says the current recession is by far the worst he has experienced in 40 years in the motor industry. “This is the first time I have seen a truly international recession,” he says. “We have been through tough times before when it was difficult to be in the premium-car business; for example, post-911 in the US. But the suddenness of the downturn and the rapid acceleration of events have affected everybody this time.”
Rolls-Royce recorded an increase in sales of 20 per cent in 2008 to more than 1,200 units. The company’s largest market by far is North America, where 38 per cent of its cars are sold. With the US economy now in free fall, the impact on sales could be dramatic and more vibrant markets such as the Middle East are too small to compensate for a major US downturn.
Money may not be the only reason for sales to drop. Potential buyers are also aware of the social pressures to avoid conspicuous consumption.
Purves will not be drawn on the outlook for his company’s performance in 2009. “Premium brands are not immune to a recession but if you have a well-established brand like Rolls-Royce or Rolex that have been sustained by constant investment you are in a better position to withstand a recession than most,” he says. “I’d much rather be in charge of an aspirational brand than a commodity one at this time. The aspiration to own doesn’t change in a recession.”
Rolls-Royce has reacted to the downturn by shedding 40 temporary employees out of a workforce of 800 and extending its Christmas break into January. Employees’ incomes or pensions were not affected by the longer holidays. “We did not want to go into 2009 with a build-up of inventory so it was necessary to take these steps,” Purves says. “If we hadn’t acted the situation would have been unsatisfactory. We have entered 2009 as a leaner operation and have further cost-reduction targets.”
Purves says having a relatively new model line-up is a help in the current market and there are no plans to shelve the launch of the all-new RR4 later this year, the name of which will be revealed at the Geneva Motor Show in March.
The “baby” Royce RR4 is smaller than the Phantom but has a longer wheelbase than the BMW 7-Series on which it is based.
Described by some as the “poor man’s Rolls Royce”, the RR4 will cost around £170,000 (€191,000) and is designed to appeal to a wider market than the Phantom, particularly corporate buyers. “It will be less formal and more agile than the Phantom and you may well find existing RR drivers buying one in addition to their current car,” Purves says. Rolls-Royce estimates the market size for the RR4 at around one million potential buyers. This compares to around 100,000 for the Phantom.
The new model is being engineered in Germany. However, Rolls-Royce is designing its own petrol engine, although details of the displacement are still unknown.
Given the company’s close relationship with BMW, a diesel option could be a possibility at some point in the future as younger RR4 buyers are less likely to be offended by the idea of a diesel-powered Rolls-Royce than the older generation.
The RR4’s body is largely steel (unlike the Phantom, which has an aluminium space frame) as steel structural members are smaller, which improves space efficiency. The other reason is that steel is easier to armour plate.
The RR4 is expected to feature plenty of hi-tech gadgetry to woo a younger clientele. Features such as a new version of BMW’s i-Drive infotainment system is likely as is radar-based cruise control and a new generation of digital screens that are not affected by sunlight or shadow.
Rolls-Royce has been taken to task by some for following rather than leading the way in new technology development. Purves does not see this as an issue.
“Our customers expect a certain level of space, luxury and unrivalled performance and that defines the shape, size, style and scale of our technology and our engines,” he explains.
“The current Phantom produces 20 per cent less CO2 than its competitors, it has a direct gasoline engine and is made from lightweight aluminium. Sir Andrew Royce believed in taking a good idea and refining it. This does not always require being at the cutting edge. We don’t believe our customers want or need that from us. And with any new technology there is always the question of reliability and reliability is something our customers expect from a Rolls-Royce.”