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Thank you for standing by, and welcome to the Aston Martin Q3 2021 Results Conference Call. [Operator Instructions] I advise you that your conference is being recorded today, Tuesday, the 4th of November 2021. I would now like to hand over the conference to CEO today, Tobias Moers. Please go ahead, sir.
Hello, good morning, everyone, and welcome to Aston Martin's Q3 2021 Results Q&A. I'm Tobias Moers, CEO, and I'm joined by Ken Gregor, CFO. We will give you a brief review of our performance, and then we will be happy to take your questions. There are some short slides to accompany our comments, which can be found on the results page of our website. So I'm almost really pleased with our performance to date, delivering strong results in line with our plan. Both wholesale and revenues nearly doubled year-on-year and adjusted EBITDA improved by GBP 190 million to GBP 72 million with 10% margin. The shift to a demand-led ultra-luxury operating model that we achieved earlier this year has been the main catalyst in supporting our continued strong pricing dynamics, and I'm happy to confirm that we have all the cover through 2021 extending into 2022. The excitement around and demand for the brand is tremendous, with increased interest to be part of our journey from potential new dealers and fantastic demand for our limited-run specialists like a Valkyrie, for example. And I'm extremely happy to announce today that we have completed an unbelievable step in our Aston Martin Valkyrie journey, completing the first customer car earlier this week. This journey has been long and challenging, but we are finally at the point that we are scaling up the assembly of this very complex vehicle, which is comparable with the Formula One car build. To deliver the Q4, and we also have AMR Pro deliveries commencing later in the quarter as well. The final member of the Valkyrie family, the Spider, was unveiled at Pebble Beach, and it is now 2x oversubscribed. We are now finalizing the unit allocations to our customers. On the other hand, our excellent progress on Project Horizon, driving efficiency and agility throughout our business is delivering results with further operational milestones achieved during the quarter as we completed the consolidation of our paint shops and restructuring of our operations. Similar to our peers, we continue to navigate the challenging supply chain environment and are closely monitoring the evolving landscape daily in order to mitigate disruption. We have also today reiterated our ambitions for our electrification journey with the expectation that by 2030, over 90% of our portfolio will be electrified or battery electric. And in addition, we have committed to sharing a renewed ESG strategy in Q1 next year, integrated with and aligned to our business plans. Our confidence in delivering our transformational growth strategy to create a world-class sustainable ultra-luxury brand is underpinned by our excellent progress on execution to date, as demonstrated with the results we have reported today. With that, I'd like to hand over to Ken.
Thanks, Tobias, and good morning, everyone. As Tobias said, we've seen a tremendous improvement in our business performance in 2021, and that's reflected throughout the financial results. As he said, we saw wholesales tripling year-to-date to 4,250 units, that included 56 specials, mostly V12 Speedsters. And geographically, the Americas and APAC, including China, were the strongest markets, representing 34% and 28%, respectively, both showing high DBX penetration, which is what we expected and we're pleased to see. And we've continued to see strong pricing dynamics with the core average selling price of around about GBP 150,000 per unit year-to-date. That's being driven by significantly reduced financial support per vehicle compared to the levels seen in 2020 and being supported by the low levels of dealer stock, both in terms of units, and importantly, age and stronger residual values. And as Tobias said, we've seen excellent progress on Project Horizon, both in terms of cost and working capital improvements through the year. And all of that combined helped to contribute to an adjusted EBITDA of GBP 72 million for the 9-month period with a 10% margin, which was a GBP 190 million improvement on the same period in the prior year. Turning to cash flow. We saw a GBP 5 million inflow in Q3, bringing the year-to-date outflow to GBP 39 million, which is a really substantial GBP 475 million improvement over the same period in the prior year. And as a result, we closed the quarter with just under GBP 500 million of cash on the balance sheet. Looking forward into Q4 and the full year, there's no change to our units or EBITDA guidance, and we've got good visibility of orders through the year-end and into 2022. As usual, we've updated our financial interest guidance, which includes the revaluation of our foreign currency debt and also some fair value movements on the outstanding warrants. There's no change to the cash interest guidance. We've updated our CapEx and R&D and depreciation and amortization guidance as well. On the CapEx and R&D side, we do now expect that to come in lower than originally planned. So we're now talking about a range of GBP 215 million to GBP 235 million. That's really due to the timing of spend rather than changes to product plans, and we do expect the lower CapEx that we've seen this year to rephase into 2022. And the same is true of depreciation and amortization, which we've also updated. So in summary, we're on track. We're starting to see some of the results of our actions we've taken to transform Aston Martin into a profitable cash-generative company. Our focus very much remains on delivering against the medium-term plan, and our progress year-to-date gives us the confidence in achieving those targets. So thanks very much for bearing with us. More than happy to take your questions now.
[Operator Instructions] We have our first question coming from the line of Charles Coldicott from Redburn.
It's Charlie from Redburn. I've got 2, please. My first question is on your level of confidence in the full year guidance. Obviously, the Valkyrie is pivotal. So can you tell us how many complete vehicles you have ready for delivery? And maybe also, can you comment on the sort of pace that you can produce the Valkyries out, maybe, for instance, how many per week? And then on the core range, you had this decrease in wholesales between Q3 and Q2 because of the work being done on the assembly lines. And obviously, you now need a big step-up in Q4. I know you don't disclose retail sales anymore, but perhaps to reassure about the level of demand, could you comment on the retail sales in Q3? Was the quarter-on-quarter change in retail sales less than the decrease in wholesales, for instance? And maybe give us an idea of what would drive an increase in the core range going into Q4? And then my second question on the CapEx rephasing. Have there been any projects that have been delayed? Or is there another explanation for the CapEx being rephased into 2022?
I'll take your Valkyrie question. Valkyrie, we're chasing for having a double-digit number delivered this year. And according to that, aside to that, we have a parallel assembly of the track only Valkyrie as well, where we have to have -- where we chase for a single-digit number to deliver to customers. The good side of that story, it's unbelievable that we achieved that momentum now. Now the cars are in kind of an assembly line, it's specific assembly, it's one of the most complex car I oversaw in my life to assemble. It's like building Formula One cars in an assembly line. We are confident that we achieved that. And this is where we are at the moment. And then just building the top for the Valkyrie is a 6-week lead time. So you cannot just increase the capacity because you have a limited capacity all over the places, if you talk with manufacturers. So the maximum what we probably can achieve next year is 3 cars a week, yes? So we're increasing our capacity, and we ramp up, but it's not a normal ramp-up of a car production. So most of the Valkyrie is anyway linked to 2022. And then after Valkyrie we move in Valkyrie Spider in that assembly line. That's not a big problem.
Thanks, Tobias. Just taking your other couple of points. On retails. Retails in Q3 were a little bit ahead of wholesale, which was good to see. And that's also, therefore, the case year-to-date. So we're happy with the development of the retail internally, although we don't disclose the numbers internally, we pay very close attention to that. CapEx. No, there's no change to the product plan overall. The rephasing is just a question of the timing of the spend and when we expect to commitments on supplier, engineering and supplier tooling, which is coming a little bit later than we originally forecast. And I'm fully expecting that to retime into 2022. So -- but no change to product plan.
No. There is no delay. There's no nothing. Everything is on track.
Great. And just to come back to the core range into Q4. The reason for the pickup? Is it just the seasonality of the business? And if so, why is that? And what we had it more to do with the hybrid?
No, we had a summer break out this year as well, 2 weeks in both plants. So this is normally the company tried to cover that with creating more wholesales before that. We never do that. So it's just a normal seasonality, what we face at the moment, yes?
We have the next question coming from the line of George Galliers from Goldman Sachs.
I really wanted to talk about 3 different areas, if possible? The first one is just on the DBX derivatives. Is it correct that the first derivative, which is in production is a mild hybrid and is that car available globally or just in select markets? And then can you confirm if there is any intention to have a plug-in hybrid variant in the future of the DBX? The second question is how we should think about the DBX volumes for 4Q and next year? Do you expect fourth quarter DBX volumes to surpass 2Q or just to sequentially improve on the third quarter? And then now that you've restructured into and you will have the new derivatives, is it fair to assume healthy growth of DBX volumes for 2022 relative to 2021? And then finally, on pricing, it looks like you saw a mid-single-digit improvement in pricing in the quarter. Is this more a function of taking away variable marketing or actions to increase list prices? And when we think about pricing going forward, now you have a very strong balance between demand and supply, do you see scope to implement a plan to increase pricing by a certain percentage each year and every year as is prevalent in other areas of the luxury sector?
You like me -- or did you want to start on DBX?
Mild hybrid. Yes, it's mild hybrid. We are paying on timing with the launch that's going to happen in China. We're going to unveil the car in Shanghai and then it's on the Guangzhou Auto Show. The cars are on the boats, the car on the way. Ramp-up work quite well, everything done. That's everything in line with our plan. And we're going to have our next by end of the first quarter next year. That car, that mild hybrid is more or less now for China, that's a China purpose only at the moment. I don't know if we're going to bring it in other markets to life. But then for the other markets as well for China, we're going to have another derivative by end of the first quarter next year. And yes, we see some momentum for our plans regarding the volume of DBX for next year. Don't want to talk about the details, but yes, there is a momentum for next year. What was the next one? The hybrid, the hybrid question. Yes, further down the road there's hybrid, DBX, a full hybrid, plug-in hybrid, in our planning, but that's more or less linked now to the facelift of DBX, which is not taking place next year. That's the year a bit -- that's a bit further down the road.
And on the -- George, on the pricing side, in Q3, we -- in Q3, what you really saw was a continuation of the same trends as we saw in the first half on net revenue with the lower incentive spend being the continuation of the lower incentive spend continuing to be the biggest driver to seeing the average selling price in the region of GBP 150,000 per unit across the core vehicle range. It does always ebb and flow by quarter because of product mix and market mix and a little bit on the exchange rate. So that's probably explaining the variation that you referred to. Going forward, yes, we obviously keep an eye on our competitors' prices and think about our own price positioning and there is the possibility for a little bit of inflation-driven pricing that we can achieve as well. But the biggest driver year-to-date has been the lower incentive spending, which we're really pleased to see.
We have the next question coming from the line of Philippe Houchois from Jefferies.
The first one I have is, if I think about what you said earlier in the year about the volume for DBX, on my math, you need to deliver about 1,000 of those in Q4. And I'm just trying to get your sense of confidence that you can deliver 1,000 DBX in Q4. And if not, when do we get to a point where we get a run rate of 1,000 produced out of That will be my first question. The second one is, I'm looking at your gross margin. It's been sub-30 for a while. It's now jumping to 33% in Q3, which is good news. I think you need to go to 40% or so. Can you quantify the drivers of the improvement. Of course, there's a bit of pricing, there's probably a bit of specials, but any kind of good news or improvement in the cost base, either purchasing or internal costs that drove the gross margin improvement?
Yes. Thanks for the questions. I think on the pricing side, you've put the finger on it already. The continued strong net revenue performance lower incentives as part of that gross margin performance. But in particular, in Q3, we had -- I'm trying to find the right number, year to -- 36 specials. And so those are contributing mostly V12s, and those are contributing to the tick up in the gross margin percentage, which is good to see. And on the DBX side, year-to-date, the number of wholesales is about 2,200. When we step back and our what we said before about overall volume, around about 6,000 units for the full year, around about half being DBX. And therefore, we're very much on track to achieve that, and it doesn't quite need 1,000 units in Q4 to get there.
But could you physically get the 1,000 units through St Athan's or we -- that's not possible or could happen at a later date?
It can easily build 1,000 units per quarter if there is a need for, yes?
Yes, that's more a question of manning and line loading and how you organize the shift patterns, the physical capacity is there to be able to do that.
Right. Going back to the Q3 comments from Ken then, the bad news, I guess, in a way, it's all mix and price, the cost base, so your average cost per car is not improved in Q3?
Sure. No, we talk about the big drivers. And year-on-year, that's mostly volume and price, but the cost savings there are there as well. we see in the margin percentage that is now 33% in the quarter or averaging 30% for the full year. If you compare that to the gross margin in the same period a year ago, it's a massive improvement. And part of that is the operating leverage and the operating efficiency of having significantly more volume going through the production facilities this year compared to last year and we start to see the benefit also of actions to improve the -- how we paint the vehicles, the line efficiencies and the line efficiencies in St Athan, they're all contributing to help improve that gross margin.
We have the next question coming from the line of Henning Cosman from HSBC.
Sorry, as the first one, I wanted to come back to the implied guidance for Q4. If I take the -- your Investor Relations consensus of full year adjusted EBITDA of 150, that implies 88 for Q4 adjusted for the legal cost. So I was just wondering if you could help us again to sort of reconcile that? I understand that you said you want to sell double-digit units Valkyrie, but for the Valkyrie for this to be attributable to Valkyrie alone, it would have to be almost GBP 2 million EBITDA per unit. So that seems a bit steep. So I hope you could help us a little bit understand the other moving parts? And again, why your confidence in achieving the guidance is so high? Secondly, similar to Philippe's question. On the Project Horizon, is it possible that you give us a bit of a sort of new baseline and maybe talk about the next milestones just to make it a bit more tangible and measurable for us? Is it possible to share maybe your view on points of gross margin improvement? Or what we should be looking out for to sort of track how you're getting on with Horizon going forward? And then you said you have very good visibility on orders. And so I thought you could maybe -- I don't know if you want to, but if you could just help us a little bit on waitlist terms model by model or region by region. Just anything that you could sort of comment in terms of giving a bit more color. Are the waitlist getting longer, are they getting shorter for certain vehicles, that would be great?
Yes, no, the order bank. When we talk about our order bank on the core business, that all other banks regarding our core business are into 2022, yes, so first quarter. Is it always reasonable to have an order bank for a core business like Vantages and V11 for the next 6 to 8 months? That's questionable because people don't want to wait that long for these cars. So I'm more than happy with where we are at the moment with the regions and everywhere. So it's not different, North America, U.K., China, whatever. So that's okay for us. And that's in line what we need as an expectation and a forward-thinking program for assembly lines and operational side. So I'm more than happy with that.
And on the full year and on the -- there's a number of species come together to support the Q4 delivery. Yes, you've got Valkyrie, and yes, that's really important, as we've pointed out in our guidance, and there's a range of how we see the number of units of Valkyrie and the Pro car that Tobias talked about earlier in terms of what we can see in Q4. And yes, those do have a very high unit contribution ranging towards the figure you saw. There's a range of different contributions depending on the model and how they've been specified and the options contribution coming. So they are very high contribution per unit. And so the full year result is very sensitive to the number of units that get produced. In addition to Valkyrie, we've got the balance of the speedsters, the V12 speedsters that we're planning to deliver in Q4. And as we already talked about, we've got DBX, including the first deliveries of the shipments of the China -- the mild hybrid derivative, but be as talked about for China, and also the seasonality that we talked about in terms of production phasing compared to Q3. So there's lots of elements coming together in Q4 to support the overall full year delivery.
And just on the horizon, if I may?
Horizon, we achieved everything what we try to achieve. So the line consolidation, the operational side, all the efficiencies, where we talk about 2030, depends on the area where we are. Everything pays off now. We are now in a situation that we have to consolidate the whole situation. We did all the paint consolidation, even doing the paint strategy was more than GBP 1,000 per car. This is now in the books, kind of. So now we have to establish the next steps. But the massive thing, the massive work has been done. And then we need to -- there's still some areas where we have -- where we're going to find some improvement, especially on the inbound-outbound, on the logistics side, but you cannot do everything in parallel. So some areas are not moving that quick. So the next steps is logistic realignment. And then it's improvement on piece prices. Where we are, we do some good stories. But in today's time, that's more volume, what we manufacture as cars to get 10% piece price reduction of the supplier is not so easy. So we are okay with that. Did we achieve everything we'd like to achieve? No, we don't because you have long-lasting contracts with your suppliers, but this is a journey. We're not going to give up on that. So we see some bits and pieces where we have 10%, 15% decrease on piece prices, but it's not cross car line and it's not all parts.
Sorry, Tobias, just to clarify, when you say that most of the heavy lifting is done now, you're talking about the operational implementation, right? The financial impact is still going to come through now from Q4 onwards, no?
Yes, yes, absolutely. Yes, exactly, exactly. perfectly, yes.
We have the next question coming from the line of José Asumendi from JPMorgan.
José, JPMorgan. A couple of questions, please. Just going back to this pricing momentum. If you could just share some thoughts as to how you think you can improve your ASP in regions like North America and China? That will be the first question. And second, can you remind us of how you set up in terms of financial services and whether you could improve your offering in financial services with additional partners? Or do you see any opportunities there going forward? And then just coming back again final one on the operational efficiencies. Is there anything else, Tobias, that you can do into Q4, into next year in terms of the assembly line? Any other -- I mean, I hear from the last question that more or less everything has been done. But from an operational perspective, from an assembly perspective, is there anything else you can actually -- that you see the need to improve? I'm sure there's something that continued improvement is embedded I'm sure in the DNA of the company.
Well, maybe I'll start, José. On the Financial Services side, we have what I would call white label arrangements with financial services provider in our major markets. By that, I mean that -- we partner with FCA Bank in Europe, we partner with Altera in the U.K., and we partner with JPMorgan Chase in North America, who provide the retail financing support to our dealers to enable them to offer retail financing offers which vary by importance, region by region, really super important in the U.S. And we work really closely with the with the dealers and with the financial services providers to seek to optimize and the residual value setters to seek to optimize the offers that we can that we make in the showroom to make sure they are as competitive as they can be on a monthly lease rate sort of basis. And we always look to see can we -- we keep a very close eye on how we can improve that going forward. China is an area which grows in importance in terms of financial services over time. So that's an area of focus for us to look to develop over time, for example. But U.K., Europe and U.S., I'm reasonably happy with the arrangements that we've got in place. On ASP and pricing, I think, yes, there's definitely the possibility in this market environment for a little bit of inflation-driven pricing. We're going to keep a tight lid on our incentive spending fresh product is always a key driver for that. So the DBX derivatives that Tobias has talked about coming in will kind of give us the opportunity to maintain and build strong average selling prices. And as we look forward a bit further into 2023, when we see the mid-cycle facelift of our sports cars, I think they give us a good opportunity to build the net revenue positions of those vehicles and further reduce the incentive spending.
There are some examples. Just having a new configurator, the traffic of hot leads to our customers -- or to our dealerships with the new configurator is almost 300% more and as well the option take rate moves up as well. That's what we see. Now we have perfect data with us. So there are some opportunities to create some pricing dynamics. And then we have to follow everybody else probably beginning of next year. We just did a price increase, yes? Are we going to do probably a next one, do probably a next step, but we have to be careful. Our sports cars are a bit overaged. We are now in a very healthy position because the stock is at the lowest level ever. But yes, there are some opportunities, absolutely. Regarding efficiency, it's a continuous improvement, but we did -- the major steps are done. We closed the paint shop. We merged paint line in one paint line in St Athan within 5 months. If you do that in a mass manufacturer, you need 2 years. That was really, really a fast transformation. Now we need to consolidate that everywhere so that we finally see all these outcomes. And then it's a continuous improvement step, yes? But it's perfect. We started with 16 cars a day in Gaydon, now we have 20, 22 per day, yes, with the same assembly line with more or less the same money. These are the improvements I'm chasing for. But it needs a time of consolidation, then we move into the normal continuous improvement journey.
We have the next question coming from the line of Stephanie Vincent from JPMorgan.
Just from the credit side. Just back on question for DBX. So you're talking about a full PHEV not taking place next year. Just wondering when you're doing your rounds on your potential customer base or marketing, I think it would be helpful just to contextualize when you -- particularly for the DBX, what do you think the percentage of customers there are that actually are waiting for either -- a potential customer base that are actually waiting for either a full PHEV version or a full electrified version that maybe you feel like that you're missing out on, if any? And then my next question is on just supply chain constraints. And obviously, Aston's done very well. But just wondering about some of the issues that have cropped up over the past few months, such as magnesium as well as there's been some labor issues, read in the local press about potential DHL strike. Just wanted to know just some, I guess, qualitative comments around that would be super helpful.
Okay. To your first question, yes, further down the road, we're going to do have a plug-in hybrid. But necessarily, you cannot do everything. Consider we are in the business with Aston Martin since a year now, more -- a bit more than a year. We created a lot of new variants for DBX, which are -- which really were easy to do, that we needed, and we have the hybrid technology transfer from Mercedes, our technology donor partner. So it needs a bit of time. Do we lose momentum on DBX by not having a plug-in hybrid? No. This is where we're really confident. We oversee the market. We know who's the market leader, Lamborghini is a market leader in some areas, in some regions, without any hybrid. So it's -- you can lean on that for the next probably 12, 18, 24 -- 2 years, but then there is time to get the plug-in hybrid on the market. The Chinese product, purpose designed China is a mild hybrid in line 6. It meets perfect the expectation of our customers in China. So we are creating bespoke vehicles for the different regions. To the supply chain, yes, for sure, it's an ambitious journey at the moment. It's one of the ambitious time I ever experienced in my life in automotive. You need to have a forecast of 6, 8 months to the companies delivering you to aluminum. It is not easy. We see a lot of disruption on the supply chain like more or less everybody else. But we are on top of that. We take care. We broker chips. We are small. We can broker the chips always on the marketplace, no problem, and give that to suppliers to get the things up and running. So yes, it is -- I don't know what I don't know at the moment, but we meet every day 2 times a day and sort that out and get on top of that. So far, everything is sorted out. We have been always able to sort out the things and get on top of it. It's not going to hit us. That's what we see at the moment.
We have the next question coming from the line of Thomas Besson from Kepler.
I have a few questions as well, please. I'd like to start with the end markets by segment. Could you give us your view about the development between SUVs on one side that seems to be still very dynamic and the sports and GT segment that had been kind of under pressure for the last couple of years? Do you think there is better momentum now in sports and GT with rebound in 2022?
Yes, you're right. I know all IHS forecasts regarding sports. And I was surprised that it's better than -- I don't know why, honestly, but IHS forecast tells you there is a bit of an improvement in that segment, and we see a strong demand on sports car. So in our product and in our sales, retail and wholesale, it's kind of a 50-50 and sports cars are, in all honesty, doing better than we thought.
Okay. That was my impression as well. Could you just clarify the comments you've made on the mid-cycle refresh for the different products? Is it still planned something around Q2 '23 for the DBS and Vantage and a bit later on for the DBX or is it somewhat later?
No. I expect what you're saying. End of Q1, beginning of Q2 is the phasing of the facelift in '23. So everything is on plan, on track for that. And it's not just the facelift, it's a bit more than that. And DBX is further down the road, yes. That's a year later. Now it's almost even 1.5 years later. You need to have the car a bit longer on the marketplace. You cannot do a facelift after 3 years. So the DBX came to the marketplace more or less last year. Now it's the first full year of DBX, a car normally need to be 3 years on the marketplace.
Okay. So more '24 then?
Yes.
I mean listening to your comments on PHEVs on the road, can you give us the just direction on the time line for your first full BEV when you want to show that to the market and when you eventually want to have that effectively sold to your customers? What should we think, something around '25, '26 or...
Yes, to answer exactly that -- yes, exactly. Yes.
Okay. And one last question about Formula One. Could you remind us the exact relationship in terms of who pays what and what kind of use you can have from your participation in Formula One because there's been some very positive comments from Lawrence Stroll and the impact of using the Aston Martin? Could you remind us who's paying what in terms of sponsorship and what your company is getting from it?
Okay. I'll come back to that point. That's always a very good question because there's some of misunderstandings out there. We have -- the Formula One business is a different ownership. That's a different legal entity, and it's almost privately owned by Lawrence and his consortium. So that's a private company. We have a relationship with that company in a naming rights agreement or put it as a sponsorship agreement. What we pay them is it's a bit north of GBP 20 million a year, but it is a similar amount Aston Martin used to pay to Red Bull as a sponsorship agreement. Back in the days, it was a Red Bull racing around the track. Now it's an Aston Martin racing around the track with a similar amount of spending, which is really -- that's really a very reasonable amount of money to get a full fleet works team. And it pays off for us in every perspective. Over the course of a weekend Formula One, you see more traffic on configurator, you see more traffic on the website. We are more in the media, Aston Martin has -- and we see -- partially the momentum what we see in the marketplace is related to that Formula One engagement. And it makes something with the brand as well. We are getting more sportier. We've got to -- a Formula One edition of Vantage is, it's the highest retail impact order intake what we achieved at the moment. It's between -- it's north of 50% of retail order, 60% kind of that way. It depends on the region. And this is a no-discount car. And this -- it pays off for us in every perspective. And we can meet -- we did all the events in our Silverstone, Valhalla was over the course of the Formula One. Just back in Austin, one of the last races, we met, I think, more than 100 or 150 customers. We showed the Valhalla there. And yes, it pays off for us really good, really good. It's a win-win situation for everybody.
I have one final small question, please, on the net financial interest, please. You raised the guidance for the P&L figure because of the ForEx evolution. It seems to have no impact on the cash payments. Could you remind us why and whether we should anticipate eventually a higher cash interest payment in H1 '22 if currencies remain where they are?
No -- the -- there's -- in Q3, there was circa just under a GBP 30 million noncash revaluation of the dollar debt because pretty much all the debt is denominated in dollars and the dollar moved from circa 1 40 to the pound at the end of June to circa 1 35 to the pound at the end of September. So you saw that effect. So that's always going to ebb and flow every quarter depending on how the pound-dollar exchange rate is, but it doesn't change the cash interest expense.
We have the next question coming from the line of Christoph Laskawi from Deutsche Bank.
It's Christoph from Deutsche. Two, please. The first one was on purchasing and that you are chasing price with the suppliers. Is there outside of the tech deal that you have with Mercedes also plan to partner a bit on purchasing, potentially increase the commonality of parts and would that leverage the scale towards the suppliers and in that way, you could additionally save on purchasing? And the second one on geographic mix. You commented that the order book is quite strong across the regions. Is there a plan to very actively steer the volumes in the regions outside of, obviously, DBX picking up, especially in Asia and North America, which will increase the weighting of those 2 markets in your overall mix?
I haven't understood you quite well, Christoph. You're talking about the partnership with purchasing of Mercedes? Or -- is that what do you mean?
Yes, I mean you already have a tech deal with them. And my question was, outside of that, if you think about potentially setting up a partnership just on purchasing for specific parts, which are currently not part of the deal in order to generate savings there.
We have always the opportunity to go on to existing contracts for components with Mercedes, and we are moving more and more to a direct sourcing for suppliers in the Mercedes or almost AMG environment. And that's really good. Sometimes it makes no sense because we have different supply sets and different suppliers and different -- as well -- sometimes we have really better opportunities than with the mass manufacturer supply sets. So it's always a kind of trade-off. But coming to the point, no, we don't have a partnership with Mercedes. We're talking with them about some issues and they're really supportive for that. But you cannot motivate a large supplier to give us a better quote because Mercedes pushes these people there. That's not going to work. And then the motivation of the suppliers is sometimes not at the point where it would be needed from our side. I saw that before. It's not always helpful. But we can use them a lot, and we use them a lot really, and that's helpful. And what was second?
Second one was about sort of market mix and do we -- how do we see that? I think certainly for -- we've talked about how DBX is really important in markets that are predominantly bigger for SUVs. Obviously, China is a really important market for us to build into, and we're excited about the possibility of the derivative we've got for China that Tobias talked about and the opportunity that could give us to grow our share there. Obviously, North America, as everyone knows, a really big car market in absolute terms and a big SUV market. So we've seen through the course of this year, DBX built nicely in there. But broadly, I think overall, we're keen to have our share region by region, car line by car line in each of those regions, and we think about it that way.
We have the next question coming from the line of Gabriel Adler from Citi.
Just one question left for me. I just wanted to come back to ASP because you talked about some pricing opportunities at the moment because of the inflationary environment. But if we think about the road map to reaching that GBP 500 million midterm EBITDA target, increasing core ASP is going to be a key lever to achieving this. So taking a slightly longer-term view, could you just help us understand what the next steps are from here to driving the core ASP higher over the next sort of 2- to 3-year period in order to reaching that GBP 500 million target.
Yes. Maybe I'll start and Tobias can build it if I missed anything out. But there's about 3, 4 steps in building that core ASP. And you are right that getting to the medium-term guidance is supported by our thought process on that. For example, adding derivatives and improving market mix on DBX, which we plan to do over the next year helps on the core ASP in terms of product mix. In terms of the mid-cycle freshening on the sports cars, they gave us the opportunity to reposition the sports car somewhat upwards. They give us the opportunity to include new technology and include a little bit of pricing for that technology, for the content in the vehicles and also give us the opportunity to include additional engine derivatives, which give us the opportunity to position one or other derivative a little bit higher in the range. And in the fullness of time, adding in mid-engine sports cars into our lineup, which intrinsically have higher price points in the market also support at the margin, the development of the average selling price. So there's a suite of those actions, all of which are in our plans to support development of the ASP.
I think there is one important thing. On the long term, midterm, as we discussed many times now, we need to achieve a 20% EBIT margin level for the company. So all the products, everything that we're going to build now for the future, all the programs will we sign off has to -- they have to underpin that ambition. And this is what you can expect, for example, from a mid-cycle or from a facelift of the sports cars. So there are some opportunities because we're not talking just a bit of a facelift, it's more than just a facelift. And this gives us the opportunity with much higher or different power outputs, things like that, to reposition the whole lineup of the sports cars. So there are some pricing dynamics behind that. And as well with the repositioning and with the facelift, we can get on a different level regarding our piece cost and cost of development of material as well. So we do all the things in parallel.
We have the next question coming from the line of Richard Phelan from Deutsche Bank.
Also from the credit side, I think I may know the answer to this, but just to be sure. There was a story that the Formula One team is not moving ahead with the proposed retail bond for investment there for the Aston Martin credit itself, are there any implications for that in terms of that investment program and potential efforts to help that?
Yes. Fair question because I understand the linkage with the name, but the short answer is no. There's no impact on Aston Martin because of what Tobias already explained about the contractual arrangement between Aston Martin, ourselves, the car company and the separately owned Aston Martin Formula One team.
Totally 2 separate legal entities, a private-owned company doing the racing business. This is what you're talking about the bond, and it's the PSC, which is a total different company, total different ownership. Shares in that, but it's a PSC.
So the withdrawal of that financing, there would be no contemplation that the Aston Martin business might look to support it because they are 2 different entities?
Yes. Correct.
We have the next question coming from the line of Charles Coldicott from Redburn.
Just a couple of follow ups, actually. Firstly, on the Valkyrie Spider. I was wondering, was there any negative reaction from customers of the normal Valkyrie because presumably, they weren't aware that there would be another 85 units of the new variant when they placed their original order? And then maybe a longer-term question on the hybrid car market generally. Do you see any risk of a bubble? Because it seems like you've increased your numbers of Valkyries, AMR Pros, Valhallas that you plan to produce. And you've got similar things happening at Lamborghini and Ferrari as well. Is there a limit to demand for hybrid cars? Clearly, not at the moment because your -- the Spider, for example, is oversubscribed, but are we anywhere near the limit? And then the other thing I want to ask about coming back to Formula One, can you just talk to us a little bit more about the option you have to purchase a stake in the F1 team? And I know it's not on your radar right now, but could you one day see yourself becoming a full F1 team? And I suppose like Ferrari does developing innovations in the F1 car that eventually go into the road cars?
Okay. Valkyrie. No, honestly, yes, sometimes you get a call from a customer, why are you doing that? And sometimes you end up with these customers that are going to buy a Spider as well. Exactly that happened because we reached out -- in the very first instance, we called all the 150 Coupe customers and told them, we're going to do a Spider. Yes, probably we didn't tell you that at a very first instance, but this is kind of a bit the business in that hybrid car segment. And we ended up that many -- I don't know to share at the moment, but I think it's 30% or so of the Spiders are now bought by Coupe customers as well to get a collection similar with the track. So the track cars are almost bought by customers owning or buying a Coupe as well. Is there -- yes, the Spider at the moment is oversubscribed. Yes, we're just closing the final contract with all the customers. You cannot do that every 2 years, you need to settle it down. And Valhalla is a total different level. Valhalla is in the 700 kind of ballpark euro thousand, so that's a different car. It's not a GBP 2 million car. You have to be careful, and we monitor that market quite closely, and we know a bit the dynamic on that market. Formula One. I think there is a need probably that we have a long-lasting relationship with the Formula One team, which is a bit more substantial and more forward thinking. And we are creative on that. But buying shares or something like that is not on the radar screen at the moment.
We have last questions coming from the Philippe Houchois from Jefferies.
Two questions. One is on China. So we see the shift in politics in China because of prosperity politics. Now all car mix has spoken to in premium or luxury like Ferrari show no sign of any change in demand or even possibly an acceleration. And I'm just wondering if you see that as well? And -- or is there a risk that customers are ordering cars that might not be -- they might not be able to buy later on? So I'm just trying to get a sense of what -- because potentially China was a big part of your midterm upside, and I'm just wondering if the change in politics might lead you to kind of revise how much traditional business might come from China over the next few years? And then I have a final one for you, Tobias, more on the electrification of cars. You're going to get into the mid-engine sports car business in the next 2 years or so. Technically speaking, can you actually make a proper or an electric version of a traditional mid-engine sports car that meets the criteria that a car needs to do in terms of dynamics and driving? Or do those vehicles have to remain somehow ICE-powered?
Yes, no, luxury, I know what you're talking about. As far as we know and we see it at the marketplace, the answer is no, we don't see any impact at the moment. And this is a similar answer you get from everybody I think in the business. Let's wait and see, I don't know. So we have to be careful. I know what they're doing. But at the moment, no, even the forecast doesn't show anything. And we know that the worst pocket in China independently what happened now with politics is moving up anyway. There still are -- so -- and everything is kind of crystal ball what we don't have. Mid-engine program, I, at the moment, think honestly that you need kind of for the next -- probably that's going to last until 2030. A mid-engine program, if you do that proper, you need -- I think it's still lean on ICE, but you need an electrified powertrain. And all the costs, what we're doing now, Valhalla as well Vanquish, they're going to be electrified. So a Valhalla, for example, is an ICE, but we have 2 electric motors in that car with each model with 150 kilowatt. We have an electrical range of 15 kilometers. And then further down the road, increase is going to be -- is going to exceed that electrical range by another 10 or 15 kilometers. Yes, that's the plan. On -- and then you have to consider something like mid-engine are always very modular, mid-engine platforms are always very modular. Yes, for sure, you can, for sure, do pure electric drive mid-engine. But I'm not sure where is the marketplace at the moment. I don't see the demand for that in 200,000- to 600,000-pounds or euro segment at the moment for purely back-driven mid-engines. You need electrified, that's then you need the electric-driven front-ex, you need all-wheel drive, but that's everything is in our plan. And, yes, aside to that, we started to create what could be a bespoke for Aston Martin, where we can use the donor technology of Mercedes, that's on the plan, on the radar screen. And we do the engineering exercises around that.
There are no further questions at this time. I would like to hand over to Mr. Tobias Moers.
So we're going to do the closing remarks. Thanks for joining us this morning. It was really good. Enjoyed your questions, I think, Ken as well. I'm looking forward, and we're looking forward to keep you updated about our progress. And the full year results will be published at the 24th of February. Have a great day, and it was a pleasure. Thanks.
Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect your lines. Thank you.