Rolls-Royce CEO: Customers ‘became even younger last year’
Rolls-Royce CEO Torsten Müller-Ötvös joins Yahoo Finance Live to discuss 2022's historic sales year, the expectations for the fully-electric Spectre vehicle, the luxury consumer demand, recession immunity, transforming the brand to be completely electrified by 2030, and the outlook for profit growth in 2023 and 2024.
Video Transcript
[AUDIO LOGO]
- Well, switching gears, if you will, luxury automaker Rolls-Royce saw strong demand across their entire product portfolio in 2022. And it led to an 8% increase in sales compared to 2021. Joining us now to discuss this strong year, we've got Rolls-Royce CEO Torsten Muller-Otvos, who is joining us this morning, as well as Yahoo Finance's Pras Subramanian.
Great to hear about some of the strength that you had seen and really on the back of a different kind of consumer that Rolls-Royce typically goes after. So what are you seeing in terms of that consumer? And how are you kind of continuing to power through some of the orders that you may be receiving?
TORSTEN MULLER-OTVOS: I mean, first of all, good morning. Yeah, we had a fabulous year last year and for the first time ever breaking through 6,000 cars worldwide. But I think even more important than volume is probably the price position we achieved worldwide. On average, half a million Rolls-Royce goes now for. And that is quite an achievement. That was 10 years ago on $250,000. So quite a substantial higher positioning of the brand.
The clients themselves became even younger last year. So we are now on an average age of 42. We are even younger than a brand like Mini, for instance. And I've seen, particularly from the younger ones, what I call fantastic bespoke commissions that were created here together with our design teams. So I must say we have seen also record levels on the bespoke side.
So, all in all, a brilliant year. And not to forget the car behind me, Spectre. We unveiled Spectre, the very first high-end luxury car fully electric.
PRAS SUBRAMANIAN: Hey, Torsten. Pras here. Congrats on the strong 2022. I'm just curious about the luxury consumer that you guys are working with these days. And are you seeing any slowdown in their uptake as we enter 2023? Or is it just Rolls-Royce buyers are just wanting to buy more cars, it doesn't matter what the macro settings are?
TORSTEN MULLER-OTVOS: Yeah, we are, Pras. We are quite fortunate because we sit on a strong order bank that already goes far into 2023, probably around eight to nine months. And more to come. We haven't seen a slowdown yet. Let's see how it plays out over the course of the next two or three months.
I wouldn't say that we are completely immune against any recessionary tendencies because you know at any hour that 80% of our clientele is business savvy. They run their own businesses, captains of industries. So when their own company is suffering, then also maybe the appetite might slow down to be seen in a new Rolls-Royce.
But I think, all in all, very strong sentiment currently what I sense all over the world. Funny enough, also China, obviously, was slightly dented last year by COVID, but only slightly. They even produced the second best ever year in history, which is quite a remarkable achievement by the team over there, given all the circumstances the country was in.
- Torsten, does your customer, I guess that 42-year-old that you just mentioned, do they really want to see your brand making electric cars?
TORSTEN MULLER-OTVOS: Definitely. Definitely. I think we are the ones who aren't defined by roaring exhaust noises or loud engines. We are silent. And silent propulsion, magic carpet ride is what Rolls-Royce is all about.
And going electric delivers an even more remarkable magic carpet feeling. I mean, I had the pleasure to drive Spectre already quite some miles. And I can tell you, it's stunning. One important thing always is it's a Rolls-Royce first and an electric car second. Very important, very important for our clients.
We have shown the car already to quite a lot of clients worldwide. The order book is very strong, even exceeding our expectations. So, for that reason, I'm very confident that we hit the nail here on the head with that car. And I'm also very confident in our strategy, that we will go further electric and that by the end of 2030, we are completely electrified. We will see a complete electrified portfolio of Rolls-Royces worldwide.
PRAS SUBRAMANIAN: And, Torsten, so with that Spectre, are we seeing a younger mix of buyers for that car? Also, are you guys set for later this year for the production of the car in deliveries?
TORSTEN MULLER-OTVOS: I mean, it's difficult to become even younger now, knowing already that on average we are 42, 43. We are seeing quite some similar age structures in our Spectre preorders. Funny enough, they are also quite a lot of clients we haven't seen ever before, clients who are coming for the very first time to us for the reasons that this Spectre is fully electric. And that is very compelling.
And it is also compelling in a way that in the super luxury segment, we will be the only ones also for the next coming years who can offer a full electric car. And I think that resonates extremely well with some clienteles who are fond to be seen only in electric cars.
- Even within the consumer environment right now, as you look across the global economy and get a sense of how your business can weather a recession and where you will need to continue to kind of, like other businesses, look across the cost structure that you do have right now, have you needed to implement a playbook even at Rolls-Royce, despite having a more affluent consumer, some type of recessionary playbook?
TORSTEN MULLER-OTVOS: I mean, we always were extremely cautious in ramping up fixed costs, for instance, or installing expensive structures. I mean, I said it already. This business isn't immune against any recessionary tendencies. And it's a quite volatile business. So we might even see years where we even see a drop compared to the previous year. That can happen.
That shouldn't be a worry at all because it will come back. My clear conviction is that structures need to be lean because I always want to be profitable. So our break-even is very low and for very good reasons.
And I think that's the way also to stay a luxury brand, to make that luxury brand, I would call it, immune against certain fluctuations in the market. You also need to look for a proper global picture in your sales structure worldwide because not every market tanks immediately. Others go even up. Others go down.
So you need to have that global balance picture. And that will give you certain stability over time. And that's exactly what we have achieved. And so, for that reason, I'm quite confident. I call it myself cautiously optimistic about the outlook for 2023 and definitely also for 2024 because 2024, Spectre comes into full play and will form, I call it, the third column between Cullinan and Ghost and then Spectre.
- Well, I wish you well on the year ahead. Torsten Muller-Otvos, Rolls-Royce CEO--
TORSTEN MULLER-OTVOS: Thanks a lot.
- --thanks for the time today, as well as Yahoo Finance Senior Auto Correspondent Pras Subramanian.
