#22 - The Malvern Link

Being a low volume sports car manufacturer in the present day must be a fairly frustrating and wretched existence. You benefit from none of the economies of scale that your larger mass market counterparts achieve, work on a relatively miniscule R&D budget and at the end of it all, are expected to meet the same rigorous emissions and safety regulations imposed by the nanny state……oh and hopefully make some money as well. That said, over the years Britain has been a mecca for the enthusiastic and talented engineer keen to leave their mark on the automotive landscape; the silicon valley of start-up motoring. Noble, TVR, Lotus, Ariel, Caterham…..all companies who have tried and sometimes succeeded at diverting customers away from the mainstream manufacturers by offering a more visceral, hand crafted alternative. The simple fact has always been that you don’t go toe-to-toe with the Porsche’s or Ferrari’s of the world as you will inevitably lose. Instead, the focus has been on the crumbs…. the niche driver’s cars which don’t require billions of pounds to make and although electronically primitive, offers a bountiful amount of simplistic driving pleasure.

In fact, the biggest failing of many of these manufacturers has been when they have tried to scale up and compete with the big boys. You only have to look at the financial woes resulting in a multitude of different ownership structures for the likes of TVR and Lotus to see that expanding is often more damaging to the business than it is beneficial. Keep It Simple Stupid…..

Which is how I get to Morgan. Morgan Motor Company didn’t actually begin operations with the goal of producing sports cars…..quite from it. Through the 1910-1920s, Henry Fredrick Stanley Morgan actually built 3 wheeled cyclecars which owing to a lack of a fourth wheel, circumnavigated British road tax at the time and provided an affordable, simple and practical alternative method of transport. It was not in fact until the mid-1930s that Morgan started producing 4 wheeled sports cars. However, the success of Morgan over the prevailing 80+ years was in many ways down to their ability to maintain the traditional craftsmanship used in building those very first cars. Often referred to as the “wooden cars”, while the chassis was steel, the body frame is made out of ash wood which then has aluminium panels installed over the top. Visually, it is an uncanny silhouette of 1940-1950s post war sports cars with their long bonnet nestled in front of the driver. If you wanted classic styling with modern performance and reliability….you bought a Morgan.

However it was at the turn of the millennium when Morgan decided to have a go at modernising the brand. In 2000, they released the Aero 8 at the Geneva motorshow. Visually, it was Zagato-esque in appearance combining all the coachwork styling cues of the original Plus 4 but revitalising them to meet present day automotive design. While the chassis was aluminium and the engine a 4.4 litre V8 out of a BMW, the frame was still constructed using ash wood. The end result was incredible. Did it matter that it shared the same headlights with those from a BMW Mini Cooper, not at all. It received a resounding response from the automotive world but more importantly, from Morgan’s existing customers.

But in my opinion, where Morgan really succeeded was in not succumbing to the allure of trying to build too many units. Maybe it was a function of the handcrafted build nature of each car but it inadvertently meant that they have been able to keep and maintain steady demand for their cars over the years. So not only are they making money but residual values of the cars are remaining equally buoyant. To put that into context, a nearly new 2017 Aero 8 with 2000 miles on the clock is currently on the market for the same price as 2018 McLaren 570S with less miles.

As an investment, the acquisition of a majority shareholding by Investindustrial in May this year does in many ways suggest a changing of the guard and potentially (in a more detrimental way) a shift in goals for the company. This has been fairly well telegraphed by their newest car, the Plus 6, which does away with the traditional wooden ladder frame for a bonded aluminium chassis, eliminates the legendary sliding pillar front suspension and makes use of a BMW twin turbo 6 cylinder engine…..the first turbo engine to ever be used in a Morgan. The result of all of this is that even the most modern Morgan’s such as the Aero 8 will be confined to the history books in their current guise making them increasingly more interesting purchases from an investment perspective. Our view is we see valuations begin to climb over the next couple of years.

Happy Motoring,

Greg