Is Ferrari becoming victim of its own success?
Ferrari just published very good figures for the 3rd quarter of the year but for the future it struggles with its objectives: staying really exclusive or expanding the brand and losing (part of) its exclusivity?
From July to September 2018, Ferrari sold 2.262 cars, 216 more than a year ago. For the whole year, sales will rise to more than 9.000 units, an all time record and more than double of 15 years ago. The net benefit was 287 million euro for the same period (against 141 million euro last year) but this incredible increase was partly due to revenues from the so-called Patent Box (fiscal reductions and revenues from patents and innovations).
Total turnover hasn’t changed much, on the contrary (+0,3%, 838 million euro), but the new Ferrari CEO, Louis Camilleri, successor of Sergio Marchionne after his sudden decease, has declared that the company has a large portfolio of potential sales in the whole world.
EMEA (Europe, the Middle East and Africa) stays the most important sales region, followed by the US, South East Asia and China. For 2018, the company aims at a turnover of 3,4 billion euro and an EBITDA of 1,1 billion euro, a figure it wants to increase to 2 billion euro in 2022.
In September, Camilleri presented his strategic plan for 2018-2022. Ferrari announced more investments in hybrid technology, the continuous launch of special series and the venue of a Ferrari SUV in 2021, and that’s where real Ferrari enthusiasts are having doubts.
“I get disgusted when I hear the word SUV and the name Ferrari in the same sentence”, the CEO himself said lately. That’s probably why this ex-boss of tobacco giant, Philip Morris, has baptized the Ferrari to come in “purosangue” or thoroughbred.
However, if it wants to grow as quickly as predicted, Ferrari will need its SUV, whatever name it has. The problem is that when it exceeds 10.000 units per year it will lose its emission rules exemption for being a small manufacturer. That’s why hybrid will be so important the next years.
One of the policies to get even more benefit per unit is producing special series. The recently presented Monza SP1 and SP2 are limited to 500 units and will be sold at 1,6 million euro each. The margins on such cars can attain 50% or more. The problem is that you can’t make too many of them and that pricing is more volatile.
The big advantage is, of course, the benefit margin. With 33%, Ferrari has the highest margin in the car business and the ambition is to increase this to 38% in 2022, as high as the French luxury brand, Hermès. Second factor to take into account: today practically 50% of total turnover comes from other products than cars, people all over the world want to have something/anything from Ferrari.
So, marketing the brand in the right way is the biggest task for Camilleri. The growth potential is still there, but too much success can lead to less exclusivity and a decline in popularity in a further future. That’s the tightrope the new CEO is walking on.