Ferrari to cut production of road cars to protect exclusivity of brand
Scuderia Ferrari
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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1

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

2

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.

3

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.

4

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…

5

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.

6

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.

7

“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.

8
roberto marquez

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.

9

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.

10

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

11

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

12

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 ! 🙂

13

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

14

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.

15
Stephen Taylor

Why not rebrand Ferrari to Maserati or Fiat?

16

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.

17

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

18

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.

19

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.

20

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

21

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.

22

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

23

The 52 mill was revenue not profit

24

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”.

25

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

26

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

27
Bring Back Murray

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

28

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

29

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.

30

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

31

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

32

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.

33
hero_was_senna

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

34

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.

35
Craig in Manila

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.

36

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

37

Neither will I…

Brand be damned…

38

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.

39

Nonsense… it’s just a car…

40

Yeah every loser’s cliché that sentence.

41

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

42
hero_was_senna

I love Ferrari, but some of them are best left in locked garages.

I do love the line about staring down lucifer, brilliant

43

well said

44

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

45

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.

46

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.

47

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…

48

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.

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