Interview: Rolls-Royce CEO Torsten Muller Otvos
With orders of the Rolls Royce Cullinan SUV booked till 4th quarter 2019, CEO Torsten Müller Ötvös is bullish on the brand’s future amidst trade wars, weaker market sentiments and looming Brexit
Named for the largest gem-quality rough diamond ever discovered, the Rolls-Royce Cullinan is the Goodwood brand’s belated if epic response to the SUV genre of automobiles. During the early days of the SUV growth spurt, Rolls-Royce briefly courted some controversy when they declared that a sport utility vehicle and all its connotations of “practicality” and “utility” would run counter to the brand’s automotive ethos. Nevertheless, when Rolls-Royce sets it mind to making a sport utility vehicle, by damned, it’s going to be an SUV worthy to carry the Rolls-Royce badge. The Cullinan, the Goodwoord marque’s first SUV, is also the brand’s first all-wheel drive vehicle.
When you pay a certain price, it comes with certain expectations and we spend over 800 hours making a single Rolls-Royce to ensure that it is immaculate. This is our competence. – Rolls-Royce CEO on build quality of his cars
Swinging through the East, starting in Japan, spending some time in Seoul, LUXUO’s Jonathan Ho and YACHT STYLE’s Gael Burlot eventually caught up with CEO Torsten Müller Ötvös at the Fullerton Bay Hotel Singapore to talk about the direction of Goodwood and the potential of the Rolls-Royce Cullinan.
Rolls-Royce CEO Torsten Müller Ötvös on brand direction and the growth potential of the Cullinan
In fact, with the Cullinan, we’ve begun to use words at Rolls-Royce that we never thought we would use like “utility” and “practicality” – Rolls-Royce CEO Torsten Müller Ötvös on the new Cullinan
You have enjoyed great success in 2018, especially in Asia, could you share some of the factors which contributed?
It was a record year for us historically. In comparison to 2017, we had full availability of the Phantom in 2018 and it had fantastic reception, becoming our main driver of revenue for that year. We were also helped with the launch of the Cullinan which brought lots of attention to the brand as you can imagine. We have delivered a cars since last Christmas across the ranges: Ghost, Wraith, Dawn and of course the Phantom. Furthermore, many markets are in excellent condition, the United States, our biggest; the Middle East is recovering while China is growing from strength to strength. Meanwhile in East Asia, Japan and Korea in particular, show amazing growth rates, totalling up to 1700 cars last year in all [laughs].
How has this exuberant growth affected your operations? Have you had to appoint more apprentices to the program?
We’ve had to employ 200 more crafts people to deal with the demand for the Cullinan. Our brand is running in contrary to what is evident in the UK automotive industry, we’re in very good shape. We want to continue our growth rate. We are always looking for more apprentices because it is not easy to find the skills required for our products, we are always looking into training and educating our staff. The best example is that coachline painting has to be done by hand and we only have three artisans capable of doing this under the guidance of Mark Court, famed Coachline painter; hence, we are always on the lookout for new people to train in all artistic fields required: embroidery, marquetry, etc. We’ve had a record intake of apprentices this year as well, we will probably continue for a number of years to come.
Do you share craftsmen in common with British shipyards like Princess and Sunseeker?
No, we have done so in the past. The teak decking found on so many yachts can also be found on models like the Dawn and the Phantom drophead. Back then, we had to get the marine skills to make that decking. We used to hire people from shipyards but not anymore because they are quickly snapped up by Princess and all the others. For this reason, we are no longer sharing but we have amicable relations. When you pay a certain price, it comes with certain expectations and we spend over 800 hours making a single Rolls-Royce to ensure that it is immaculate. This is our competence.
You have the ability to offer really bespoke products…
Indeed, I dare say Rolls-Royce wouldn’t exist if we weren’t able to deliver this experience. 98% of all cars leaving Goodwood are heavily bespoke because once you decided that you want a Rolls-Royce, a lot of creativity goes into making the ultimate car your own. Your imagination is our limit. The bespoke division alone employs over 100 people: engineers, designers, consultants and so forth.
With this level of hyper-luxury, do you find any synergies or similarities with other industries like watchmaking or the arts?
Very much so. In fact, many of our clients are very interested watches way beyond the kind that I would wear [he wears a Vacheron Constantin Patrimony]. These timepieces are commissioned by them and just for them, over half a million dollars or more by watchmakers I have not even heard of before. We share common ground in our attention to details and artistry. Art and even bespoke tailoring inspires us, I’m glad that luxury exists because it’s an enriching lifestyle.
We have seen C-level Executives from yacht companies crossing over to luxury automotive brands, are there crossovers in design or more potential collaborations?
We deal a lot with Burgess. We also attend all the relevant boat shows (Monaco Yacht Show, etc) because client profiles are very similar. We have also launched cars on the decks of yachts and we provide a great experience on the Sydney Harbour as we unveil a car on the helipad with a great party. Amazing photo-opportunities. Part of the allure of luxury is our ability to surprise and delight a client: Rolls-Royce is not in the car business, we are in the luxury goods business, nobody actually needs us and so we have to create something they absolutely want. It’s all about inspiration at the end of the day.
Have you been asked to incorporate your designs onto their yachts?
What we have seen happen is clients who want the Rolls- Royce feel for their Gulfstream. Sometimes certain colours and key details are commissioned to match. As you get to know your customers better, you will find key elements and themes will be commissioned for his helicopter, home and private jet. His DNA is reflected in his environment.
The media landscape changes often, is there a platform you find particularly effective to reach ultra high net worth individuals?
It’s very much driven by private functions and money can’t buy invitations. We do a lot on social media and electronic direct marketing. Broader advertising is not very effective for us. The brand doesn’t have a problem for not being recognised or being unknown, everyone knows Rolls-Royce, for us, it’s all about targeting customers. We do more with digital intelligence and digital science to identify potential prospects and finally, the most important thing is that the potential customer needs to test-drive it. You can talk about a Rolls for hours but nothing compares to the experience, particularly on a model like the Cullinan. This model approaches customers we have never seen before and its crucial for them to drive it first thus, we started having exclusive drive events which allow the customers to drive it for a day so they understand what it means to own one.
When I last saw you at the launch of the Wraith, you mentioned that this was the ultimate self-drive Rolls-Royce, is the Cullinan more for personal driving or for people to be driven in?
Self-drive is the name of the game. You hardly see in Asia that our cars are operated in chauffeur mode with the exception of the Phantom. Nobody operates a Dawn or Wraith or Black Badge in chauffeur mode. The Cullinan is 80% self driven. Funnily enough, the demographics have changed as well, our customer profiles are skewing younger and younger over the last years. They are so much younger than they used to be 10 years ago thanks to new business models, IT, apps, Fintech and technology entrepreneurs. If you are smart and creative, it’s much easier to make money today than 20-30 years ago hence, we are getting new customers we have never seen before including families and female customers.
How do you precisely target this younger generation in Asia?
Just to go on a slight tangent, Bloomberg reported that the car brand most mentioned in pop songs and music videos is Rolls-Royce by far. In a way, with all the influential celebrities and pop cultural influences, this becomes a self-fulfilling mechanism which helps us a lot. We can’t influence this and we are not paying influencers, this authenticity comes from natural, organic, influence. We also created a lot of marketing collaterals and assets which help support the eco-system. The Black Badge with a black Spirit of Ecstasy also helped to create an “edgy” Rolls-Royce which resonated with younger audiences. Success with the Black Badge has shown us how to connect with these consumers.
We have seen Rolls-Royce entering less developed markets like Kazakstan and closer to home, Cambodia, what are some of the considerations when choosing which market to enter? What would be the trigger to enter such a market?
We look at the market potential. We don’t open a dealership because we have 5 or 6 ready customers, we look into the long term to see what potential there is and how many high net worth individuals are in the area, will there be potential growth over time? We look at mutual growth opportunities. Our partner invests big money and we want to ensure that it is a successful enterprise, especially for us brand-wise. It takes a year at minimum to analyse, make a conclusion, develop a business plan and then execute. I would say that we are happily covered globally, there’s no need for further expansion, we are currently sitting on 135 partners and representatives in 56 countries worldwide and that’s sufficient. It’s easy to harvest the low hanging fruit like the first 4 or 5 customers but once they’ve bought, you have to look for the others and if they’re not there, then you are in trouble. Having a luxury dealership close because there’s no business doesn’t convey the prestige of success if you fail.
Do you find the same situation with other luxury car brands where the infrastructure or roads not ready to support these vehicles but people still want to buy?
Yes we do. Cambodia and Africa are good examples where certain individuals just collect the cars. India is a difficult market for us even with the long-standing history between the country’s maharajahs and the brand. We are still selling cars there but the combination of lack of infrastructure, a complicated tax scheme and the government not supporting luxury consumption adds up to create a slower market for us there. In fact, Indian journalists often ask when India will be overtaking China so there’s definitely the aspiration for luxury, just not the consumption.
China has clamped down on luxury consumption as well haven’t they?
They did it years ago during President Xi’s investigation of corruption scandals and that dampened demand for luxuries for not just cars but timepieces and other luxuries. Things have since normalised and now business is in good shape in China.
The Cullinan is sold out far into the 3rd quarter 2019 and the beginning of the 4th quarter.
How do you measure success and importance of a model like Cullinan in Asia?
We have our business matrixes whenever we conceive a new model. We are not sales or volume driven. We are profit driven. My target for the BMW group (our shareholders) is profit and we are tasked with how we want to reach it. We need to sell cars otherwise we wouldn’t generate revenue but I think we have conservative plans because it is even better to achieve victory when we overshoot these goals. The Cullinan is sold out far into the 3rd quarter 2019 and the beginning of the 4th quarter. The whole plant is doing extra shifts to cope with demand but there is a limit to how many we can produce. The Cullinan appeals to families and female customers for many reasons – the power, strength and safety of an SUV. In fact, with the Cullinan, we’ve begun to use words at Rolls-Royce that we never thought we would use like “utility” and “practicality” – you can take the kids to school or throw the dogs in the back.
What is Rolls-Royce’s stance on the environment? Any plans to go electric?
We will go full electric and not hybrid within the next decade. We are probably one of the last ones offering 12 cylinder combustion engines and there are a growing number of markets which will no longer allow combustion vehicles in the current form. For this reason, we need to prepare ourselves and I believe that a fully electric car fits very well with the brand in terms of instant full torque and silent running. I’m very optimistic that evolution of battery technology will see improved range that is inline with what we expect from a Rolls-Royce. We are also part of the BMW group which has invested massively into electric drives.
Where do you believe the next big opportunity for the brand?
I would say the next big thing is electrification. These technologies will be developed in-house using BMW Group technology but most importantly, it has to be a proper Rolls-Royce at the end of the day. This is one phase. The next phase is also to enter real customer commissioned bodies and coachbuilds.
What is the biggest challenge for Rolls-Royce in Asia?
Uncertainty in business – from lowering taxes or consumer sentiment. You only buy a Rolls-Royce when you feel good because you don’t need one to travel from A to B. Consumer sentiment is the most troubling because it is a very big influence on our customers who are business people and entrepreneurs worried about politics, international trade routes, trade relations, tax wars between countries. This is the biggest concern in general, not just Asia.
Any challenges due to Brexit?
It’s extremely hard to forecast. We are very much worried and we are urging the government to create a smooth transition. A hard Brexit will disrupt our logistic chains overnight, the flow of skilled labour from outside the UK – 30% of our staff are non-Brits. Going down the wrong alley would not be good for our business. Not from a tax or import tariff perspective but the super delicate logistics chains which will affect the flow of parts for our cars. We are importing 38,000 components daily, higher for some models and I only need to lose one part and we cannot finish a product anymore. Only 10% come from UK suppliers and even these suppliers will have sub-suppliers in Europe, this chain is very delicate and our products are super bespoke with specific configurations. I cannot afford to go on a stock hold for components.
Is the contingency plan a Rolls-Royce that is not from Goodwood?
No. Definitely not. We will not move to our factory to Europe, our contingency plan is alternative routes for logistics and even the feasibility of flying components into the country to avoid jams on the border. But all this is limited because we can only sustain this for a short period.