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Even in a down economy, Rolls-Royce is on a roll

Limited Volume, Big Margins Spell Success
Bigger isn't always better, especially when it comes to selling super luxury. Rolls-Royce CEO Torsten Müller-Ötvös expects the British automaker to again post a record year, despite the economic troubles in Europe and weak growth in both the US and China.
"It is not all doom and gloom out there," Müller-Ötvös explains, noting that the declining sales in Europe and elsewhere have been offset by good performance for the marque in the Middle East, Japan, Singapore, Hong Kong and Russia.

The UK votes for Brexit and it will impact automakers

It's the first morning after the United Kingdom voted for what's become known as Brexit – that is, to leave the European Union and its tariff-free internal market. Now begins a two-year process in which the UK will have to negotiate with the rest of the EU trading bloc, which is its largest export market, about many things. One of them may be tariffs, and that could severely impact any automaker that builds cars in the UK. This doesn't just mean companies that you think of as British, like Mini and Jaguar. Both of those automakers are owned by foreign companies, incidentally. Mini and Rolls-Royce are owned by BMW, Jaguar and Land Rover by Tata Motors of India, and Bentley by the VW Group. Many other automakers produce cars in the UK for sale within that country and also export to the EU. Tariffs could damage the profits of each of these companies, and perhaps cause them to shift manufacturing out of the UK, significantly damaging the country's resurgent manufacturing industry. Autonews Europe dug up some interesting numbers on that last point. Nissan, the country's second-largest auto producer, builds 475k or so cars in the UK but the vast majority are sent abroad. Toyota built 190k cars last year in Britain, of which 75 percent went to the EU and just 10 percent were sold in the country. Investors are skittish at the news. The value of the pound sterling has plummeted by 8 percent as of this writing, at one point yesterday reaching levels not seen since 1985. Shares at Tata Motors, which counts Jaguar and Land Rover as bright jewels in its portfolio, were off by nearly 12 percent according to Autonews Europe. So what happens next? No one's terribly sure, although the feeling seems to be that the jilted EU will impost tariffs of up to 10 percent on UK exports. It's likely that the UK will reciprocate, and thus it'll be more expensive to buy a European-made car in the UK. Both situations will likely negatively affect the country, as both production of new cars and sales to UK consumers will both fall. Evercore Automotive Research figures the combined damage will be roughly $9b in lost profits to automakers, and an as-of-yet unquantified impact on auto production jobs. Perhaps the EU's leaders in Brussels will be in a better mood in two years, and the process won't devolve into a trade war. In the immediate wake of the Brexit vote, though, the mood is grim, the EU leadership is angry, and investors are spooked.

Rolls-Royce to decide on SUV by year's end

The market for high-end luxury SUVs continues to climb, but Rolls-Royce is in no huge rush to jump on the leather-clad, high-riding bandwagon. The company has just announced a new sales record for the fifth year running, with over 4,000 units delivered in 2014. But it recognizes that SUVs are where the market is going, so it's going to carefully weigh its options, and make a decision on how to proceed by the end of 2015. This according to Rolls-Royce CEO Torsten Muller-Otvos in speaking with Auto Express. "There is not yet a final decision, because we still need to answer a couple of questions ourselves," said Muller-Otvos in regard to a potential SUV, admitting, "You need to move the brand from time to time, you need to go with the flow. We might even see in a few years that the classical sedan segments are shrinking due to the fact that SUV type vehicles are growing. So if you don't change your product portfolio to something that is up to date then at some point in time you might even die." If the storied Goodwood-based marque does proceed with an SUV, it would be following former sister-company Bentley into the segment. But they're not the only ones. Mercedes is said to be preparing a Maybach version of the next GL-Class, Jaguar Land Rover keeps making increasingly expensive and luxurious Range Rovers, and Maserati is preparing to launch its Levante crossover. The prospect of an SUV isn't the only project Rolls-Royce has in the works, though. It's got a convertible version of the Wraith coming soon, and sooner or later there will be a replacement for the thirteen-year-old Phantom saloon, potentially to include some carbon fiber in its construction to help trim weight. A hybrid powertrain could be in the mix as well, though customers have shunned the idea of a pure electric model. Just don't expect a Rolls-Royce more accessible than the Ghost: the company is glad to be growing its sales, but is not chasing any specific sales targets that would press it to cheapen the brand by going down-market.