Why Rolls-Royce boss expects to be profitable despite COVID

Rolls-Royce broke its global sales record again in 2019, with a volume of 5,152 cars, but the brand’s all-time high will not be challenged this year because of the COVID-19 pandemic and the changeover to the new Ghost. Despite this, CEO Torsten Müller-Ötvös promises that the BMW Group subsidiary will be profitable this year. He explained why and outlined his plan to transition the 116-year-old brand to electric powertrains in a recent phone interview with Automotive News Europe Correspondent Nick Gibbs.

Rolls-Royce sales were down 37 percent in the first half due to the pandemic. Will you profitable this year?
Yes, we will be profitable this year.

Many of your rivals will not be. What is your secret?
Our secret is that we are able to generate pricing at the highest levels worldwide, which is an indication of the brand’s strengths. Secondly, we have kept the company very lean. We have just 2,000 staff at Goodwood. Thirdly, we have a process here that allows us to scale down costs while maintaining the business.

Can you provide some examples?
We transitioned the entire launch of the Ghost to a digital format, saving costs. We were also able to do digital closed-room events with our customers worldwide. It was a secretive environment, fully safeguarded IT-wise, where clients had a chance to see the car without needing to travel. It was very successful and now we are now sitting on a really lovely order bank.

Last year you had record sales. Where will you be this year?
Our business tanked because of COVID just like everybody else, but now we see positive signs from around the world. We will not be on 5,000. That’s not happening, but we planned for this because we knew we would be without the [previous-generation] Ghost after stopping production last year. Production of new Ghost started in September, so will see the first customer cars arriving in November and December.

The Ghost’s predecessor was Rolls-Royce’s best-selling car ever. Will the new-generation sedan overtake it or does the global shift toward SUVs mean the Cullinan will be the brand’s No. 1-seller in the future?
If I look in our current order book the Ghost is not faltering in any way. In our part of the market, if a sedan is convincing then it’s still very popular. Will the next-generation Ghost be No. 1 again after it finishes [its life cycle]? That is still a question mark. The Cullinan is a very strong performer worldwide. For that reason, at the end of both models’ life cycles it might be the Cullinan that has more sales in total than the Ghost. But there is still room for a limousine. Some Ghost clients tell us “As much as I like the Cullinan, it’s not for me because I want to drive a more subtle Rolls-Royce.” The Ghost offers that perfectly.

You describe the design of the Ghost as “post-opulent.” Aren’t Rolls-Royces opulent by definition?
I have learned in this job over the last 10 years that you need to reflect individual taste patterns. The worst thing you can do is to say, “What has worked for one subsegment works for another subsegment.” That would be a catastrophe. Nobody needs a Rolls-Royce to get from A to B. They are buying one because they love the product. Ghost clients are very different from Cullinan clients, who are very different from Phantom clients. The Cullinan needed to be a statement and the Ghost, by intention, has a more minimalist, more subtle design.

Media reports say BMW may end sales of cars with its V-12 engines in Europe. Are you planning for a life after the V-12?
Our 12 cylinder is different from BMW’s. We have a different displacement and different engineering. We have recently updated it and we can keep it for a long, long time.

How long?
That depends on legislation, but we see a future for the engine probably until the end of decade.

When will you have electrified cars?
We will offer the first full-electric Rolls-Royce within this decade, and right after, step-by-step, we will electrify the entire range. That’s the long-term strategy, but this will not happen overnight and it won’t be an either-or approach. There will be an overlapping phase.

Is that why you decided not to electrify the new Ghost?
The reason we are not yet offering it in Ghost is purely because when we offer electrification we will do it to perfection. Our customers have certain requirements regarding range and charging times.

Will you follow Bentley and offer plug-in hybrids?
No. We are not going into hybrid or plug-in hybrid. Our clients definitely appreciate electrification because it fits perfectly with the brand. It’s silent and torquey. For us, the right approach is to go directly from combustion to electric.

Have you had to make any job cuts?
We made no job cuts in Goodwood, which is great news. Look what happened to others. We have started a second shift because the order book is so good and for that reason I’m optimistic. We are still in COVID times, but business signs are encouraging.

Do you still have staff on furlough?
About 15 to 20 percent as of early September, but not the ones building the cars. We also have rotating working patterns, so people are returning to the office for two to three days and going back to working from home. We don’t have the biggest premises, so we don’t allow everyone back in the office.