Luca di Montezemolo departed as the head of Ferrari partly because of his desire to keep a lid on production numbers and keep an air of exclusivity about the brand, and Sergio Marchionne disagreed. Montezemolo is gone and so is the production cap.
According to SEC filings for the Ferrari spin off, the company plans to raise production from 7,000 units annually to 9,000 by 2019: a 30% increase. Additionally, the Italian sports car maker plans to introduce a spate of new products during that time as well.
Ferrari said in the filing the move to increase capacity is to “growing demand in emerging markets and from demographic changes as the size and spending capacity of our target client grows.”
That said, Ferrari executives are cognizant of the importance of exclusivity. The desire to have something that cannot be easily gotten – and the waiting list to buy a Ferrari is lengthy – is part of the inherent value of the cars.
Ferrari officials, or in this case most likely Marchionne, is walking a fine line with bumping up production levels. The company’s already profitable, but the ability to increase sales adds to the bottom line. When trying to raise $10 billion by selling off a 10% stake in the maker at $48-plus a share, it’s important to excite the investor community.
(Ferrari begins IPO process. For more, Click Here.)
However, current owners often bank on the fact that their cars will hold their value. Some used Ferraris are worth more than the new version of the same vehicle because of that prestige factor. Ferrari said in the filing it will “maintain a reputation of exclusivity and scarcity among purchasers of our cars and deliberately monitor and maintain our production volumes and delivery wait times to promote this reputation.”
The automaker also said it will preserve its pricing and reputation for technology and craftsmanship by making special limited-edition cars and supercars like the LaFerrari, priced at $1.2 million or more.
In its filing, Ferrari said that for the quarter ended Sept. 30, it expects to report revenue of between 720 million euros and 730 million euros ($820 million and $830 million), up 9 to 10% over last year, and adjusted EBITDA of between 210 million euros and 215 million euros, up 19 to 22% over the same quarter in 2014.
(Ferrari unveils the new 488 Spider. Click Here to check it out.)
Ferrari also said in its filing that it plans to expand the brand through theme parks, retail stores and licensing deals for sportswear, watches, electronics and other accessories.
“We believe our success in these activities demonstrates the value of Ferrari as a true global absolute luxury brand,” the company said in the filing. Marchionne had long resisted a spin-off of the Ferrari brand, but apparently relented as it became apparent the trans-Atlantic automaker needed cash to fund future product development programs for its other U.S. and European brands.
Among other things, 5 billion euros will be invested in the Alfa Romeo brand to bring out eight new products by 2018, a plan expected to increase Alfa’s global sales 550% — to 400,000 annually.
(Click Here for a first look at the new Alfa Romeo Giulia.)
FCA also needs cash to develop the high-mileage and low-emissions vehicles needed to meet new government mandates in the U.S., Europe and other parts of the world.
4 responses to “Ferrari Plans to Build More Cars by 2019”
Production of 30% more Ferraris will increase availability and profitability, but dilute the exclusivity (and residual value) of the marque. I trust that Ferrari’s board (as well as Marchionne) understands this, as well as the perceived “aura” of the brand.
It’s a delicate balance, easily upset, and must be addressed with utmost care…
Marchionne is all about short term spikes in sales and then he moves on after crippling the company due to grandiose plans that don’t materialize. Ferrari will have a lot of work to do to rebuild the brand when Marchionne’s reign of destruction is over.
There’s an SUV coming. Bet on it.
More buyers will mean the aura is damaged when new buyers understand how poor the build quality and design are. Hopefully, they will refuse to buy into the idea that indifferently made cars are part of the joy of Ferrari ownership. Either way, the people who will get rich are the famiglia deemed worthy of buying IPO shares.