A Tale of Two Taxis
It's a tale of two taxis. Coventry based black cab firm Manganese Bronze has just published disappointing results, with losses widening to £4.7m after an accounting cock-up and a slump in orders for its iconic black can in the key London market.
Manganese said that overseas sales (up by 6.3% to 504 cabs) failed to compensate for a drop in UK sales (down by 23% to just 577 cabs) and that the firm was unlikely to return to profit in the final quarter of 2012. It had previously said that it would be back in profit this year. It's all a bit worrying for a firm with just £2.8 million in the bank. Losses in 2011 were £700,000.
Operating margins were squeezed by supply chain issues (importing components all the way from China can't help) as well as increased warranty costs. The firm's shares have dropped by 75% since April, from a peak of around 40p in April to 10p recently as investors have piled out of the firm.
Critically, despite the bad news, Manganese stated that it still had the backing of its Chinese joint venture (JV) partner Geely. It needs it. Manganese owes Geely around £19m for components and vehicles.
And it's clear that Manganese is now pinning its hopes not only the success of the JV with Geely but also by becoming the distributor for Geely when it starts exporting to the UK later this year. Chinese cars are coming to the UK, and quite soon it seems, and this may be critical for Manganese's survival.
Manganese has of late blamed the weak UK economy, global economic uncertainty, and a delay in meeting an order for 1,000 taxis from Azerbaijan for poor results.
But there's more to it than that. While the reputation of Manganese's iconic black cabs has improved in recent years, the sad fact remains that the TX4 cab is an old, heavy design and new entrants are taking market share. That can be seen in the success of another taxi firm, Eco City Vehicles, which uses a Mercedes-Benz Vito platform, along with rear-wheel steering technology developed by Eco City.
Eco has just announced a 40% jump in half year revenues to £16m, with profits of £800,000. The firm increased its share of the new London licensed taxi market to 38% (from 21%) according to data supplied by Transport for London, on the back of the new 'Blue Efficiency' Vito taxi. The cab has a six seater capacity and reportedly a lower overall cost of ownership than other cabs.
That's not surprising as big firms like Mercedes can take one of their mass produced vans and work with niche players like Eco to convert it to a taxi, thus keeping costs down.
And as I've noted before, Nissan is about to enter the market with its NV200 cab (again based on a bigger selling platform). Nissan already has a strong reputation in the taxi market, as its 2.7-litre diesel engine was used by Manganese in their FX4 and TX1 cabs, and just went on and on, much to the delight of cabbies.
So things are about to get even tougher in the taxi market for Manganese, and a key question is whether its tie up with Geely can lead to new models that can compete more effectively with big firms like Mercedes and Nissan. In fact, new models are needed if the firm is to remain as an independent player, or even to survive at all.
Professor David Bailey works at Coventry University Business School