Bentley makes largely handbuilt ultra luxury rides that are
rarely seen outside of the wealthiest zip codes. But now
Bentley is enjoying its strongest sales in its 102 year
history. If you want a massive 5 or 6000 pound vehicle with a 12
cylinder engine that can top 200 miles per hour and accelerate as
fast as many Porsches, Bentley might be the car for you, but it
will cost you. The most affordable Bentley's start
around $175,000, but few are bought at that price. Some
buyers may choose to buy off the lot, but others can specify and
customize their cars to an astonishing degree. Bentley says
there are 17 billion ways to specify options and choices on a
Continental GT for example. Beyond that, there are still
further options within Bentley's portfolio of Mulliner cars,
which are its coachbuilt vehicles, revived classic
models, and special limited editions. Pricing on these cars
is controversial. Bentley Mulliner Bacalar and Blower
Continuation Series cars both command prices around $2 million
and Mulliner has produced cars with even larger price tags.
Bentley is also mounting a powerful campaign to completely
transform itself. Bentley's performance raises several
questions. How sustainable is it success? What makes this brand
stand out against competitors like a Rolls Royce or Mercedes
Maybach and will the brand be able to pull off its transition
to EVs?
Bentley was founded in 1919 by Walter Owen Bentley. W.O.
Bentley wanted to build a brand that combined quality
construction with high performance. He and his brother
started a business importing cars made by the French company
Doriot, Flandrin, and Parant. During that time he created a
lighter piston from an alloy of 88% aluminum and 12% copper.
Performance success came quickly, adding the new pistons
to the DFP vehicles gave Bentley several victories between 1912
and 1914. That included several at the Brooklands racetrack in
England where he said 12 Class B records. Bentley also had a
series of victories at Le Mans in the 1920s.
In just 11 years, a guy had an idea to build a car, created a
brand, made it globally famous and successful. In just an 11
year period as a guy in his early 20s.
For about 70 years, Bentley was owned by Rolls Royce and for
much of that time, as one writer observed it very much played
second fiddle to the prestigious double R. Volkswagen Group
bought Bentley in 1998. The German automaker meant to
acquire both Bentley and its parent Rolls Royce but VW ended
up with most of Rolls Royce's assets, and rival BMW got the
Rolls Royce brand name and logo. Bentley is similar to Rolls
Royce in many ways, but Rolls Royce's emphasis has always been
on extremely customizable luxury cars with rides that feel as
though they float over the ground. Rolls Royce does also
tend to start at a higher price point. And while Bentley
certainly does offer luxury and customization, it places much
more emphasis on high performance alongside luxury.
Bentley has benefited from being under the aegis of the
Volkswagen Group. The arrangement allows Bentley to
share resources with others in the group and it gives them
access to capital markets. It's also quite unique in the
Volkswagen Group in terms of what it offers, so it helps VW
cover another corner of the market without competing too
much with any other brand VW operates. The association with
Volkswagen has been especially useful during the semiconductor
shortage.
Because we're small, and because we have a huge order bank. And
because our products profitable, we've been blessed and
prioritized to get pretty much every single component that we
need, whereas other brands in the group have had to close down
factories
As of 2020, the company only has three basic model ranges, the
Continental, the Flying Spur, and the Bentayga. The
Continental is a two door coupe. the Flying Spur, which started
out as a variant of the Continental is a four door
sedan. The 2020 Bentley Flying Spur held the honor of being the
fastest production sedan on Earth with a top speed of 207
miles per hour. The Bentayga is an SUV. All come with large
engines. The V8 engine is considered a small power plant
for Bentley and its competitor Rolls Royce. That is in contrast
to more mainstream vehicles where V8s are typically the
largest engine sizes available. But these are not sleek, sporty,
hypercars. A Bentley Flying Spur is about 209.29 inches well over
17 feet long with a curb weight of 5373 pounds. The Porsche 911
Carrera, a classic small sports car, is about two and a half
feet shorter and 2000 pounds lighter.
So in this category it's really Rolls Royce, Ferrari,
Lamborghini, Aston Martin and Mercedes Maybach. And within
that, you really have two categories of supercar like
sports cars, and then you will have luxury cars. More for like
chauffeur cars. Bentley really splits in between these two
again it has its racing heritage, which makes it maybe
more comparable to someone getting a Ferrari perhaps, but
at the same time, it has this ultra luxury aspect which makes
it a competitor to a Maybach or a Rolls Royce.
Bentley's are also mostly hand built. It takes around 110 hours
to build a Continental GT and around 130 to build a Flying
Spur or a Bentayga. Building the 12 cylinder engine alone takes a
team of 45 workers about six and a half hours not including
testing. On average, Bentley makes 50 Continentals and flying
spurs and 40 Bentaygas in a day. For comparison, Volkswagen pumps
out 2,200 units of its high volume of Golf, just one model
out of its Wolfsburg, Germany factory in the same amount of
time. The Bentley Mulsanne originally took 400 hours to
produce. Bentley's Mulliner custom built cars can take much
longer depending on the vehicle. It will for example, take a full
year to build all of the 12 vehicles in the company's Blower
Continuation Series.
Bentley says its customers like different things about the
experience of owning one.
They love the fact that they can pull up at the finest event and
get the best parking place without having to ask, or they
can cover long distances with friends in absolute comfort with
the best sound system the most people have ever had in the
homes, let alone a car. So it's that experiencial aspect of it
as well. But the thing that really, really stands out when
you look at any feedback that we get is our interiors.
Phil Brooks has owned Bentley cars for decades. He bought his
first in 1963 when he was courting his wife in England. He
has had Bentley cars from every era of its history and is
involved with the Bentley Drivers Club, an international
organization of fans.
The Bentley is just a glorious car to drive. And it's one of
those cars where you can feel the road, you know everything
that's going on as you're driving along, and you record
this in your in your memory bank, but you're not getting
jarred and knocked all over the place by it.
Brooks has also owned Rolls Royces.
And you can compare the styling of the GT or a Spur to the
styling of Rolls Royce. And even the really snazzy looking Rolls
Royces don't have that panache they just don't have it.
The vehicles can have their quirks and challenges but for
fans like Brooks Bentley's have an all around excellence that is
just tough to find elsewhere.
Even with just a few basic models, Bentley might be doing
better than it ever has. Sales reached a record 11,206 units in
2020 despite the pressures of the Coronavirus pandemic. The
brand attributed its success to new model launches and the
greater global availability of existing ones. All of its
current generation of models were launched in the last one
and a half years. Bentley's previous record sales year was
2017 when it sold 11,089 cars, but the company was also
suffering financially in 2018 and 2019. It undertook ambitious
restructuring efforts which it wound up around the beginning of
2020. Going into the pandemic at the start of 2020, Bentley it
had its largest order book in 20 years.
Closing the factory for effectively 12 weeks in terms of
lost capacity means that we only had 75% of production available.
Bentley's order book was even stronger at the beginning of
2021 than it had been a year earlier, and the first half of
2021 brought record sales.
Just to put in context of how well Bentley's been doing of
late in H1 21 it's sold already 7,000 units so if you annualize
that, it's already ramping well above their normal trajectory in
their normal levels.
The first half of the year also yielded more profits than the
company has earned in any full year before.
They actually were a loss leader in recent years and but now in
H1 21 their profit margins have been the highest we've seen in
many years.
It is important to point out that the company only sold about
100 more cars in 2020 than it did in 2017. It is a very low
volume manufacturer, but each vehicle is very profitable.
Bentley success is also coming amid a spike in demand for
luxury goods and luxury vehicles specifically.
We've had this lift in overall demand for luxury products that
no one expected. And it's probably given us another 10%
boost over and above what we thought we were thinking 25% to
30% growth in the market, it's more like 35-40% globally as we
stand.
The average age of the Bentley customer has dropped about a
decade in the last 20 years.
Our average age now is mid-40s. And bearing in mind when we
launched the GT, back in 2003-2004, it was mid 50s. So
over 20 years, we've got a lot younger.
Bentley's total addressable market might actually be far
greater than its current customer base.
The market size for the ultra high net worth luxury market is
about 2 million customers. And then Bentley makes only about
10,000 vehicles a year. So the penetration level they need to
hit is actually quite low and ultra high net worth growth is
like 4% to 5% per year.
At the end of 2020, Bentley unveiled its big plans to become
a leader in sustainability. The Flying Spur and Bentayga are
available as hybrids and the Continental hybrid will join
them by 2023. A fully electric Bentley is due to launch in 2025
and Bentley says it will be the first luxury car in the world to
be carbon neutral across its entire life. That means parts
for the car will be sourced through carbon neutral tier one
suppliers. It will be built through a carbon neutral
manufacturing process and will not emit any carbon itself
because it is an EV.
The company already has a solar power field from which it
sources 30% of its energy, and it recycles 95% of the water its
factory paint shop uses through a reverse osmosis process.
Bentley says it will also have a strategy for the car at the end
of its usable life, that could be quite some time. Bentley says
80% of the cars it has produced since 1919 are still on the
road. The company is involved with a project to develop a
fully recyclable electric powertrain. Its entire range
will be either hybrid or electric by 2026 and fully
electric by 2030. Its factory in Crewe England has been carbon
neutral since 2019. Bentley says it was the first of Britain's
high end automakers to have a carbon neutral factory in the
UK.
Some in the automotive industry think the move cannot come fast
enough and say Bentley and other high end vehicle manufacturers
might be a bit behind the rest of the auto market and
electrification. Bentley management said this themselves
in interviews as far back as 2018. Then again there are those
who think that as with other high end brands, there is some
essential Bentley-ness or at least high end touring sedan
flavor that is lost when swapping out that distinctive 8
or 12 cylinder engine for an electric powertrain that sounds
practically like nothing at all.
To kill every nameplate that we have, every engine that we have,
and rip out the factory to be able to build a completely new
set of cars with different powertrains and different
components in a five to eight year period is I would say a
once in a lifetime opportunity. It's also one of the biggest
challenges we face.
The company says at least 55% of current Bentley customers and
potential buyers would want an electric Bentley within the next
five years.
When we started looking at sustainability credentials and
the future of luxury actually bigger than Bentley we could see
either an existential threat to luxury consumption or we could
be role models for sustainability. And by
neutralizing any negatives about consuming luxury products,
automotive in particular, we can create a unique selling
proposition.
In addition, being one brand in a big stable allows Bentley to
enjoy the spoils of massive Volkswagen investments in
electric vehicle technology.
For Bentley being connected with Volkswagen is critical here.
They can share platforms with Audi, which now it's included
inside. Porsche as well is also part of VW. A unified battery
sharing these sorts of things and parts and components should
help it transition in its electrification campaign going
forward.
Bentley's high prices can also help it absorb the costs of EV
technology development. Nevertheless, the company's
timeline is breathtaking. Then again, it wouldn't be the first
time Bentley managed rapid change. Between 1919 and 2003,
Bentley built and sold 36,000 cars. Four years later, it had
sold another 36,000.
The company does not share sales or profit projections but told
CNBC it is very optimistic.