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Ferrari to cut production of road cars to protect exclusivity of brand
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Posted By: James Allen  |  09 May 2013   |  12:01 am GMT  |  89 comments

Ferrari has decided to cut production of its high-performance road cars by at least 4% this year, despite an increase in sales, as the Italian luxury car manufacturer seeks to preserve the exclusivity of its brand.

In 2012, Ferrari sold 7,318 cars but chairman Luca di Montezemolo said the company would look to reduce that figure to below 7,000 vehicles while still aiming to increase profits.

Despite the global economic outlook remaining uncertain, Ferrari has seen a growth in revenue of 4% to 551m euros (£433m) in the first quarter of this year. Net profit was 54.7m euros (£46.3m).

Ferrari continues to provide a vital contribution to owner Fiat. On 1,798 cars sold in the first quarter of this year, Ferrari made 80m euros (£68m) before interest and tax. That compares to 603m euros (£511m) on sales of about one million vehicles by Fiat.

The idea behind the move is to protect the resale value of the company’s cars. Ferrari’s entry-level California model costs around 185,000 euros (£157,000) in Italy, rising to 272,000 euros (£230,000) for the top of the range 12-cylinder F12.

The Italian company cut production in 2003 for similar reasons.

Montezemolo said: “The strength not to listen to people who say ‘your competitors will benefit from this’ is a choice I learned from Enzo Ferrari, who used foresight in enhancing the value of the brand.

“The exclusivity of Ferrari is fundamental for the value of our products. We made the decision to make fewer cars because otherwise we risk injecting too many cars on the market.”

Montezemolo added that Ferrari’s engine business, which suppliers motors to Maserati, will help keep revenues on track.

The brand continues to do well away from the road car business, with the company earning 52m euros (£44m) in revenue from 60 merchandising licences of Ferrari-branded clothing, watches and other items.

Montezemolo said: “Ninety-five branded items are sold every minute around the world.”

In tandem with the cut in production, Ferrari plans to invest 100m euros (£85m) over the next two years on improvements at its Maranello factory, where 3,000 people work on building 32 cars a day.

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89 Comments
  1. Peter Bakalor says:

    Guess we’ll all just have to buy Maseratis instead.

    1. hero_was_senna says:

      Have you seen the new Ghibli… :D

      1. Doobs says:

        Lambo for me.. ;)

      2. Oz Geezza says:

        Lambo,DNA goes back to a Tractor, better
        believe it,same for Aston Martin.
        David Brown Tractors,thus the DB.

      3. Equin0x says:

        Lambo’s are a farce, glorified VW’s, even the components are the same, like interiors and electronics, plus the R8 and Gallardo are basically the same cars with a different skin, Ferrari and Mclaren are the real true kings of supercars even Porsche has joined the lifeless VW circle.

      4. Kbdavies says:

        Lambo “DNA” does not go back to a tractor. It’s like saying Saab DNA goes back to fighter jets, or Porsche’s dna goes back to a Volkswagen Beetle or German Tank!

        Lamborghini commisioned an ex Ferrari engineer to build his first automobile engine, and an ex Maserati engineer to build the chassis. The cars and tractors have as much in commons as both having 4 wheels and driven by a human being.

    1. Dai Dactic says:

      Interesting article!

      “Ferrari is like a beautiful woman,” Di Montezemolo said. “You must desire her, you must wait for her.”

      So I’m wondering – does Ariel Castro have any Italian supercars hidden at his Cleveland home?

      Maybe the ‘woman as owned object’ implication in the quote is inappropriate in the 21st century.

      1. Richard says:

        What a silly mix of two completely different topics.

        I’ve studied feminism, have absolutely no problem with any cultural liberalism or equality, and certainly find the current news pretty abhorrent.

        But to suggest Luca is anything other than passionate about the brand he’s worked so hard for over the past 40 years (he joined Ferrari from Fiat in 1973) is just plain boring. Can we talk about F1 and cars please?

      2. Dai Dactic says:

        ‘F1 and cars’ might be a ‘hermetically sealed environment’ for some but for others it carries multiple associations.

        If my view was ‘just plain boring’ I’m surprised that you were inspired to reply to it.

        Many thanks!

  2. Sebee says:

    Wow hero, isn’t this what we were just talking about a bit? New cars not being special? )

    If you copy and paste this headline into Google Translate PR translator option it probably comes out…”Ferrari sales slow as 1% ers no longer wish to flash their wealth in modern austerity times.”

    1. CTP says:

      100% agreed. Way to spin a slow sales day.

      1. petes says:

        +++

    2. hero_was_senna says:

      Obviously LdM reads JAonF1 ;)

  3. DB4Tim says:

    Dam-it …and I have been saving for sixty years…..it will take a bit more now!

    1. Joel says:

      DB4Tim, I understand your comment was in jest. Just wanted to point out that supercars like Ferrari won’t sell a call to a customer just because he/she can afford it. They usually have a “qualifying criteria” that you need to meet (not accounting the money you have in the pocket).
      There are times they would even suggest that you need to buy a used one before being offered a brand new one. That’s what I read somewhere :)

      1. Rich B says:

        that’s only true for the hypercars like the enzo or laferrari. anyone can buy a 458 if they have the cash.

      2. Equin0x says:

        true but even the F12 has criterias.

      3. F458 says:

        Your talking about an ultra exclusive car like a LaFerrari where they invite you to buy one. For something like a 458 or california if you have the readies you can go buy anytime.

  4. Sebee says:

    Wow hero, isn’t this what we were just talking about a bit? New cars not being so special? )

    If you copy and paste this headline into Google Translate PR translator option it probably comes out…”Ferrari sales slow as 1% ers no longer wish to flash their wealth in modern austerity times.”

  5. DaveZ says:

    If they want the brand to be “exclusive” don’t put the pony on teddy bears.

    1. Doobs says:

      Mercedes and even BMWs used to be pretty exclusive, now even my dog’s got one…

      1. Kbdavies says:

        Not a Z1, or a Z8….both are still pretty exclusive and quite rare…not that it was planned this way, but they just never took of really.

    2. F*ckYeah says:

      Harsh, but spot on.

    3. Sebee says:

      I have a lovely Ferrari ashtray myself. Gets rid of smoke fast!

    4. CL says:

      I agree, quite a bit of their merchandising looks cheap/tacky to me.

      1. Mike84 says:

        Agree, never liked it, but if it makes almost as much as the cars themselves how could they not?

    5. Jock Ulah says:

      I grew out of the bear a short while back and am now the proud owner of one of their ‘wood pull along cars’.

      Have booked a day out at Mugello and will be dragging it around the track to the accompaniment of my own ‘brmmm-brmmm’ sound effects.

    6. Richard says:

      But you still want one. We all do. Even if we say we don’t :)

      1. hero_was_senna says:

        I want one and an original Fiat 500… Oh yeh and an Alfa 1750 GTV once more

  6. Lindsay says:

    Apparently selling more than 7000 cars a year is diluting the brand, but selling branded tat to non-owners worldwide isn’t. Right.

    I’ve got a tip for them for free: if you want to sell fewer cars but for greater profit, send more to Australia. We’re suckers for a bit of automotive price gouging here.

  7. KenC says:

    “Net profit was 54.7m euros (£46.3m).”

    Wow, if Ferrari’s F1 team were self-sponsored, that would not be enough to run the team, Thank god for their sweetheart deal with Bernie and that they have some deep-pocketed sponsors.

    ““The exclusivity of Ferrari is fundamental for the value of our products. We made the decision to make fewer cars because otherwise we risk injecting too many cars on the market.””

    Have they factored in that the global luxury car market has grown significantly with the development of China?

    1. Doobs says:

      …those fewer cars just got even more expensive.

    2. RodgerT says:

      And all this time I was thinking that they were already keeping the exclusivity high by building them in such a way that every fifth car built would burst into flames at some point in the first 2 years of ownership.

      1. Equin0x says:

        What is the problem with some of you? first people on here are bitter and jealous over Vettel now Ferrari’s road car program? give it a rest.

    3. Kevin says:

      That’s £46.3m for a quarter not a full year.

      1. KenC says:

        Yes, thank you. Multiply by four and compare to Ferrari’s F1 budget.

      2. stoic little says:

        They make about $100M a year just by licensing their name to goods.

      3. KenC says:

        @stoic little:
        From the story:
        Sales are £433m) in the first quarter of this year
        After-tax profit was £46.3m
        Pre-tax profit was £68m

        Fiat profit £511m

        Merchandise sales £44m

        There is no breakdown of profit on merchandise sales, BUT, merchandise sales are already included in the company numbers.

        If you are saying that Ferrari makes $100M in profit a year, that would work out to £16.3m a quarter. That would be about 35% of their company profit, and 10% of their sales. I’m not sure that’s such a good thing where t-shirts and hats are so critical to the profitability of the company. Is it a fashion house or a car company?

  8. TMAX says:

    Good move . agree to montezemolo’s logic. Premium comes at a price.

  9. Lol says:

    They make fruity roadcars for fruity guys.

  10. JW says:

    I think this is the wrong way to go about it. If you want to make your brand more exclusive, make your products more exclusive. Build cars that are even more sophisticated and expensive. Don’t just artificially limit the production, effectively barring people who have done nothing wrong from purchasing a car that they want. That is not true exclusivity.

    1. AndyFov says:

      A second hand market awash with used near-new Ferraris going for a pittance does the brand no good at all.

      Based on those figures they’re making the best part of £40k per car. That’d soon be eroded if demand for new plummeted, so limiting supply to manipulate / sustain demand makes sense to me.

    2. MISTER says:

      Exclusive = limited or limited to possesion.
      It doesn’t matter how sophisticated or expensive the cars are if there are millions produced every year.

      Exclusive means that not everybody can have one, no matter how much money you might have.

      1. mclaren48 says:

        The very fact that production is being limited will have no negative effect
        for Ferrari new cars or near-new cars. On the contrary limits on market supply
        will maintain a healthy level of resell price of most cars built
        during this period between consumers and with resellers . I simply believe
        it is a bold move from Ferrari who by this makes a clear statement that its car
        - technically – enjoys the number one position on the market.
        From the many car test reviews available it is a perfectly credible message ….
        The fact that it is selling merchandise items is simply an iconic measure to maintain
        brand interest and exchange levels on the market. Whether or not its aim is to attain 10%
        in value in relation to its annual car sales is I believe totally irrelevant.
        In the case of Ferrari, pushing apparel sales is no way a consequence of its production
        strategy to decrease car units coming out of the production chain but on the contrary it’s a
        quite refined move by the company to balance down the message it has been communicating over
        the years of having the technically “best” car available and position itself also as a commercial brand.
        This demonstrates its marketing expertise in paralell to its technical excellence (in building cars)
        Many other supercar manufacturers such as Mclaren or Porsche diversify with merchandise sales, but the
        product life cycles of their cars and history of their manufacturing are completely different;
        to note that Porsche produces 159 thousand cars annually, not 7000. The numbers speak for themselves…

  11. mhilgtx says:

    This is sound business for Ferrari.

    Sergio Machionne is damn fine businessman. My reservations for how he has treated Chrysler’s (and many of my clients) dealership base here in the US aside.

    Investment in the Maranello plant is amazing already. The amount of care and technology put into that plant is amazing. Whether it is the extra step of pre-machining the sand molds for the engine and head castings down to the attention put on the final fit and finish the factory and the people that work there are fantastic. For more information http://www.ferrari.com/english/about_ferrari/ferrari_today/the_factory/Pages/the_factory.aspx

  12. Quade says:

    Thats a way of saying, “your next Ferrari will cost that bit more.”

    What image does the Ferrari brand evoke? Picture blood red, think passion; shapely as a woman, but dangerous as a caged tiger. Picture beauty that can stare down Lucifer until he blinks his scaly eye.

    I guess paying extra for the Ferrari brand is worth every penny.

    1. Me says:

      Nonsense… it’s just a car…

      1. Quade says:

        No, they are priceless artworks with pedigree, presence and character.

      2. F458 says:

        well said

      3. hero_was_senna says:

        I love Ferrari, but some of them are best left in locked garages.
        I do love the line about staring down lucifer, brilliant

      4. Equin0x says:

        Yeah every loser’s cliché that sentence.

  13. DB says:

    Products being similar, I won’t pay anything extra for any brand.

    1. Me says:

      Neither will I…

      Brand be damned…

  14. Craig in Manila says:

    Is Renault also planning to change production rates at their factories in the upcoming year ? Or Mercedes ? Or just Ferrari ?

    Anyways, good luck to the Ferrari employees who will be affected by the reduction in output combined with planned improvements to the factory process.

    Perhaps they can find new jobs making the other 50,000,000 ferrari “branded items” that are sold each year.

  15. Kay says:

    To protect brand exclusivity, all they have to do is just to do a Lamborghini. Bring out ultra rare sleek looking extremely high performance cars, like the Reventon and Veneno, slap a 10 billion dollar price tag to each of them and they’d make more money than selling 3,000 Ferraris.

    1. hero_was_senna says:

      Kay, do you mean like the FXX or the 599 FXX. All cars sold to special customers for $1,000,000 plus…
      And they never own the car? Inspired lol

      1. Kay says:

        Nope :) , imho I think that’s a huge ripoff for the buyers LOL, but the FXX programme were all good for Ferrari’s pockets nonetheless.

        I do mean making cars like Reventon and Veneno, rare supercars that buyers get to keep in their own personal museum.

  16. Mon Pen says:

    Fewer cars, more tacky trinkets. Hardly brand enhancing, surely. Nice money spinner though.

  17. Spyros says:

    I thought Ferrari’s main profit maker were keyfobs and hats for Fiat owners… :D

  18. franed says:

    Just a tad different from Longbridge!

    Or from the old AML plat at Newport Pagnell.

    Quite a lot of new plant costs to amortise into the car prices for the future.

    One would expect priced to rise substantially.

  19. Bring Back Murray says:

    It’s almost like every man and his dog has got one these days

    1. Richard says:

      Well as time has gone on, there are more about obviously!

  20. nukenelly says:

    Sounds logical until you consider all the branded tat and the Abu Dhabi theme park…

  21. I know says:

    Total net profit: 54.7m €
    Income from licensing branded merchandise: 52m €

    This means that Ferrari’s profit is almost entirely due to licensing branded merchandise, with the car business on its own only just breaking even.

    1. Kevin says:

      I think the profit is for a quarter. The merchandise is for a year. That’s how I read it anyway.

    2. Hendo says:

      The 52 mill was revenue not profit

      1. I know says:

        When it comes to collecting license fees for goods that a third party will manufacture and sell, revenue and profit are almost interchangeable.

        Of course, Ferrari needs to continue to build cars in order to generate income from merchandising. However, without licensing its brand to others it would be a much less profitable company. Licensing is not just a questionable sideshow, it’s part of the core business.

        Perhaps the article does mix quarterly and yearly figures, but Ferrari’s business model is really quite unique. Cutting car production by less than 5% has nothing to do with “protecting the brand”.

    3. KenC says:

      Company sales were £433m, while merchandise sales were £44m, or around 10%.

  22. Monktonnik says:

    I understand about not diluting the brand, but I suggest that this is more about stepped fixed costs.

  23. Jock Ulah says:

    If Ferrari really wanted to promote ‘exclusivity’ it would only supply to those who undertook to make full use of its ‘superior technology’. That is, those who were prepared to race the machines on track, whether in amateur or professional events.

    Most of their output probably ends up in the hands of individuals who wish to demonstrate the size of their disposable income and ‘superior automotive taste’ whilst driving slowly down select high streets.

    Putting it another way – the average actual logged speed of a Ferrari road car is probably similar to that of an average family saloon – an exercise in wasted technology.

    1. mhilgtx says:

      They are a car company not a racecar company. Make no mistake about it they are FIAT and FIAT run. Segrio is all about controlling cost and inefficiencies.

  24. Richard D says:

    There are probably not many products in the world where you can make more profit by selling fewer!

  25. Charlie says:

    If he wants to protect the exclusivity of the brand, he can start by closing down Ferrari’s global empire of overpriced tat shops and their theme park. Then they can stop production of cars like the California. I’m a Ferrari owner myself (355) and find much of the rubbish spoken by LdM is just embarrassing.

  26. Witan says:

    A sensible company wants all its customers but ensures it doesn’t need them all – because if you do then you are hostage to fickle market changes.

    So in the face of a recession in the Eurozone, a drop in growth in China and an all round picture of weakness in economies, they are ensuring that they don’t get into the position of having to chase business to survive healthily.

    Good on them.

    If you can do it in a way which makes your brand sound even more exclusive, so much the better.

    1. Stephen Taylor says:

      Why not rebrand Ferrari to Maserati or Fiat?

  27. Elie says:

    I’ve never been in a Ferrari but every person I know who’s owned one never kept it, said its impractical and bought something faster for 2/3 the price.

    The move to limit number makes perfect sense to protect the brand- but agree with other posters- all the other prancing horse bits need to disappear also. The move will help them weather any economic pressures that may come in future years also, as sooner or later the u

    1. Elie says:

      Upward trend of sales and revenues will slow and go back the way anyway.

    2. Charlie says:

      Did they not know that mid-engined, 2-seater sports cars are impractical when they bought a Ferrari?!

      1. Elie says:

        Yep – people always dream they can live with a few issues just to have a name and a top notch racing car. But a many bumps on Syd roads teach them otherwise ! :)

  28. I’m not currently in the market for a Ferrari, but this sounds like a solid concept to me. Cutting down on supply may actually allow them to *gasp* increase the price of a Ferrari.

  29. roberto marquez says:

    Most comments here appear to be from people that has never been on a Ferrari, less owned it.Do you really think he is taking this decision just because it came to him one day? Ferrari is the longest surviving manufacturer of hihg luxury and performance cars, Montezemolo is the heir of that tradition and he knows very well what he is doing.Long live Ferrari.

  30. F458 says:

    This is the right move to make. We can’t have a brand like Ferrari being owned by every tom, dick and harry. The brand has to be preserved otherwise its value will be lost and Ferrari will no longer be perceived to be the dream. Maybe Mercedes/BMW/Audi should have taken a leaf out of Ferrari’s book.

    1. KenC says:

      “Net profit was 54.7m euros (£46.3m).”

      Right so rather than make Billions of pounds, Merc/BMW/Audi should try to make £46.3m, a quarter.

  31. Mike84 says:

    How much of this is because the current factory hasn’t got the capacity to keep up with the demand? Maybe after the new factory is on-line they’ll increase production.

  32. Danny says:

    Personally I can see the point of Montezemolo…one of the peculiarities of Ferrari, more than other luxury and sport cars, is exclusivity…probably a Ferrari would not have the same charm and appeal if there were many cars like this on the streets…

  33. Andrea says:

    Ferrari ahs already doubled production in the last 15 years. From 3,500 cars end of 90s to 7,300 in 2013. I think exclusivity can be preserved even with higher numbers, after all they are now selling in the entire world, whilst 30 years ago the market was North America and some Western European countries.

    1. Richietheruler says:

      The cars they make now are soo good that if they dont limit production when the replacement comes they wont sell as much to new ferrari owners because you’ll have a lot of good cars flooding the market for cheap. So protecting the car buying market ? Yes. Merch makes them money and advertises for them just like F1 does.

  34. Martino says:

    very interesting article to read. thanks you for all the information. Regards!

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