As an example of scarcity driving value, the limited edition V12 hybrid LaFerrari is tough to beat. Some 499 vehicles were built by the Italian sportscar maker at a sticker price of more than $1 million. A barely used model went on sale this summer for $5 million.
Ferrari shares have tumbled since the carmaker's IPO
Sergio Marchionne, Fiat Chrysler's voluble chief executive, has tried to pull off the same trick with Ferrari itself, arguing that its unique status meant it should be set apart from the common rabble of carmakers when it sold 10 percent of shares in an initial public offering last month.
A consummate salesman and financial engineer, Marchionne pitched Ferrari to investors as a luxury goods company that deserves an earnings multiple similar to Hermes, Prada or LVMH. As usual, the man who brought Fiat back from the brink of bankruptcy got what he wanted. Ferrari's shares have declined 12 per cent since the IPO, taking some of the gleam off that shiny red paintwork. But it still trades at more than double the forward valuation of premium automakers Daimler and BMW.
Fiat Chrysler is holding an extraordinary general meeting this week to approve the demerger of Ferrari, ahead of a spin-off of the remaining shares. This is good for the parent company, which can fund new investments and pay down debt with the proceeds. But what about new Ferrari shareholders? To justify such a lofty valuation in the long-term Ferrari earnings will need to accelerate rapidly, which seems unlikely. If not, that luxury premium will be hard to defend.
Ferrari's price-earnings ratio is higher than its fellow carmakers
Ferrari plans to increase vehicle sales from a projected 7,700 units this year to about 9,000 by 2019, which will help. But increasing volumes much further is difficult when it is rarity that lets you keep prices and margins high. Last year, the adjusted Ebitda margin was 25 percent, well ahead of competitors.
Unlike Porsche, Lamborghini and Bentley, Ferrari has also resisted developing a cash-cow sports-utility vehicle. "Our low-volume strategy may limit potential profits," said Ferrari in its IPO prospectus. Quite.
Marchionne would have you believe this doesn't matter because Ferrari is more than a car company. Yet there's scant evidence so far that Ferrari is capable of turning its prancing-horse logo into a luxury goods label to rival Louis-Vuitton. The large multiples attached to fashion brands in part reflect their earnings potential in China, which accounted for only 9 per cent of Ferrari vehicle shipments last year.
Ferrari generated more than 80 per cent of revenues last year by selling cars, spare parts and engines. In contrast, Formula One sponsorship receipts and Ferrari brand merchandise and licensing sales contributed less than 15 per cent.
Many people grow up lusting after a Ferrari, but fewer dream of owning a Ferrari watch, jacket or polo shirt. Changing that will take time and it's unclear how plans for more crowd-pleasing Ferrari theme parks will burnish exclusivity.
Ferrari's development costs also have far more in common with a carmaker than a handbag-maker. Last year R&D accounted for almost 20 per cent of sales and Ferrari will struggle to reduce that if it wants to restore its pedigree in Formula One, where it has not won a constructor's championship since 2008.
By cutting ties with its parent, Ferrari is thumbing its nose at the industry norm for low-volume brands to share costs as part of a larger stable. Volkswagen has 12 brands, including the aforementioned Porsche, Lamborghini and Bentley. And the car business is by nature capital intensive. Just ask Marchionne, who gave a presentation in April entitled "Confessions of a Capital Junkie" in which he urged consolidation and accused the car industry of failing to earn its cost of capital.
A high-end performance car is frequently an emotional, rather than rational, purchase. Yet Marchionne's luxury sales pitch stretches the singular appeal of Ferrari a little too far.
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Carlos Sainz has given the clearest indication yet that Toro Rosso will be using Ferrari engines next season, saying the team will be 'more Italian' in 2016.
The Spaniard brought his rookie season in F1 to a close in Abu Dhabi by just missing out on the points in 11th position, though he ran as high as seventh early on and was comfortably faster than highly-rated team-mate Max Verstappen for much of the weekend.
Indeed, in a season that has been blighted by the lion's share of the reliability problems in the team, Sainz is nonetheless destined to retain his place in the team alongnside Verstappen, though their positions will only be confirmed once Toro Rosso's future is assured.
As it stands, Toro Rosso – much like its Red Bull sister team – is officially without an engine, though both are set to be on the grid next year with differing deals.
Red Bull has stated it will be able to confirm its engine shortly, with an unbranded, self-developed version of the Renault power unit set to be the choice, but Toro Rosso looks set to be paired with Ferrari.
Though Sainz refused to mention Ferrari specifically, he indicated he was happy with the 'more Italian' choice relative to the current Renault power unit.
“I think it is looking better for next year,” he said. “We might have a bit more horsepower which would have helped at the beginning of the race to hold onto the good start! We can't say the name yet but maybe we will have a more Italian team…
Indeed, Sainz feels Toro Rosso stands to make big strides in 2016 beyond the engine choice based on the lessons learned this year, while he is pleased to have received positive feedback from management too.
“Helmut Marko is very pleased. He is very positive about me, about the team and I think he is a bit surprised about the season and how much we are fighting Red Bull when we had the chance. I can say he has given me some positive feelings
“It can only get better and I have full trust that Toro Rosso will have a step forward in terms of reliability, pit stops, mechanical grip. I think we have a good chance for next year.”
Could debut at the 2016 Geneva Motor Show.
Ferrari has started tests of an updated Ferrari FF (Ferrari FF facelift), which is expected to arrive in the market next year. Prototypes of the FF facelift on test in Europe have camouflaged bumpers and grille, suggesting that minor styling updates are in store for Maranello’s 4WD offering.
Speaking to Indian Autos Blog today at the launch of Ferrari India’s flagship showroom in New Delhi, Enrico Galliera, Senior Vice-President Commercial & Marketing, Ferrari SpA, said –
FF is one of the car that allowed us to satisfy the growing need of our clients. Of course, we’re working to further innovate the car, it’s too early to say when and how. But our clients will have surprise in the future.
While the Italian brand has taken to downsizing, having replaced the Ferrari California’s 4.3-liter V8 with a 3.9-liter bi-turbo V8, and having introduced the same on the 488, the FF will continue to hold on to its V12 naturally-aspirated engine, Galliera confirmed. “No, the engine, it’s our pinnacle. It will be V12 naturally-aspirated,” he stated.
According to reports online, engineers are likely to retune this engine to about 700 PS from the current 660 PS, while the 7-speed double-clutch transmission could make way for an 8-speed unit, which will result in reducing CO2 emissions.
The FF had its premiere at the 2011 Geneva Motor Show, and the 2016 Geneva Motor Show could be an ideal venue for the facelift’s debut.