Ferrari purosangue - just thrown away my Ferrari cap

Ferrari purosangue - just thrown away my Ferrari cap

Author
Discussion

Lee Jones Jnr

966 posts

134 months

Saturday 16th January
quotequote all
Oilchange said:
Live and let live! If a little kid who's a Ferrari fan wants to wear one would it offend?
Quite right, my apologies for not qualifying my conclusion with my assumption that the OP wasn’t a small child.

Roof down

289 posts

90 months

Saturday 16th January
quotequote all
_Leg_ said:
I've stopped buying new cars and haven't bought a new car for 4 years come February. I look after my current Ferraris , Porsches, Mercedes, BMWs and classics fastidiously and they're all like new (some of my classics better than new). That's where I would rather put my money now. All my classified browsing and shortlisting for the 2 garage spaces I currently have are classics or vintage cars.

I try but cant get excited about anything new these days. TBH that makes me a bit sad after a lifetime of car obsession.
I am with you all the way here

Ferruccio

1,503 posts

83 months

Saturday 16th January
quotequote all
Kinda depends how you do it.
The Lamborghini LM002 was as true to the spirit of Lamborghini as any of his cars.
The Urus is different from that.
The Aston DBX is a nice thing.

SSO

1,069 posts

155 months

Tuesday 6th April
quotequote all
Ferrari really does not need to do this. Just finished this blog on the topic:

While not officially confirmed that Ferrari will be launching an SUV in 2022, rumored to be called the Purosangue, it is one of the world’s worst kept secrets. The funny thing is Ferrari spent years denying they would ever launch an SUV. The former CEO, Louis Camilleri, stated that he hated the word SUV and that it did not belong in the same sentence with Ferrari. Other Ferrari executives have stated that a SUV is not part of Ferrari’s DNA and the Enzo would roll over in his grave if it were to happen. Yet here we are. Poor Enzo is being set up to do a 180 and Ferrari’s DNA looks like it’s about to be permanently mutated.

Two questions come to mind; #1 why and #2 is it a good idea? I am sure that Ferrari will issue a very polished press release when they launch the Purosangue which will not call it a SUV and will explain why it is the right move for the Ferrari brand. However, I think the core reasons are quite basic, money and fear of losing out. On both counts, I believe Ferrari is being both shortsighted and misjudging the impact of their brand. It’s hard to argue against the fact that in the short term, a Ferrari SUV will boost the top line. While it might be margin dilutive, on a cash basis, it should add incremental profitability. However, there are easier ways for Ferrari to goose its financial results without having to put the essence of its DNA at risk.

With a near two year wait list, increasing production capacity to meet the excess demand on the existing portfolio would achieve much of the same outcome. Ferrari is also potentially losing a fair number of customers that simply don’t want to wait that long to get their car. Increasing production capacity so the wait list can be brought down to a more reasonable six months would not only increase sales for the few years it takes to ramp up production, but it would also give a long term boast as potential customers who would have walked away in the past, will now stay.

On the “fear of losing out” on the SUV craze, this is where I really believe Ferrari is making a mistake. They can afford to lose out. SUVs are not who they are, and they will detract Ferrari from being true to its core essence. Can Ferrari sell 5,000 SUVs a year? I am sure they can. Could Ferrari sell an additional 5,000 units of other models in the current portfolio if they really wanted to? I am sure they could do this too. While the SUV risks changing the core essence of the Ferrari brand, increasing production of the existing supercar portfolio has little to no risk. What’s driving this fear? Mostly what the Volkswagen Group has done with Bentley & Lamborghini and to a lesser extent Aston Martin. When I looked at the numbers though, the picture on if getting into SUVs is a huge success its not exactly clear cut. Also, it’s important to keep in mind that VW builds the Bentayga and Urus off of the same platform used for the Audi Q7 so the added development cost & complexity on the manufacturing side is fairly minimal.

As Bentley’s annual unit sales are similar to Ferraris, Bentley is an interesting case to look at. In 2014, the last year pre the Bentley Bentayga SUV launch, VW sold 11,033 Bentleys, in 2019 VW sold 12,430 Bentleys of which 5,232 were Bentaygas (I am using 2019 as it’s a cleaner base. 2020’s numbers are distorted by all the disruptions caused by Covid-19). That’s a 2.4% CAGR in terms of units and on a € basis the CAGR is only slightly better at 3.7%. It is not exactly impressive and hardly a major success. Net net, the vast majority of the Bentayga sales came from cannibalizing other Bentley models.

The Lamborghini numbers tell a bit of a different and much rosier story at first glance. I don’t believe it is as relevant to Ferrari given Lamborghinis much lower starting base and weaker brand equity. To give you an idea of the importance of Lamborghini in the VW Group, while even Seat and Skoda’s financial results are broken out, Lamborghini’s are just lumped in with Audi’s. In 2016, the last year prior to the Lamborghini Urus SUV launch, VW Group sold 3,579 Lamborghinis. In 2019, 8,664 Lamborghinis were sold. Of the 8,664 Lambos, 5,233 were Urus’ which would indicate that the Urus brough new buyers into the Lamborghini brand and the volume was fully incremental. The added volume would certainly have been a welcomed by the dealer network and taken Lamborghini from a borderline brand to relevant and more supportable. When looking at shorter term sales trends though, it seems that Urus sales have now flattened and will likely remain in the 5,000 units per annum range going forward. Lamborghini now has a situation where 60% of their sales are SUVs and the way this will change brand perception in the medium to long term is significant. For VW, turning Lamborghini into a SUV brand is probably not a major concern as long as that moves more units. What is also interesting is both Bentley and Lamborghini seem to have topped out at around 5,000 units for their respective SUVs.

So, is selling roughly 5,000 SUVs a year a good business decision for Ferrari? If they need to increase total volumes by 5,000 units, there are a lot of other ways to get there that do not put the brand at risk, add a huge amount of extra complexity to an already highly complex supply chain, and may cause poor Enzo to do back flips. On a purely profit basis, Ferrari will make more money on 500 next generation LaFerraris then it will on selling 5,000 Purosangues. Ferrari’s current market capitalization is $52 billion which means the market values Ferrari at $5.48 million for every car it produced in 2020. No other car company comes even remotely close (next closest is Tesla with a valuation at $1.2 million per car produced). That number will not hold if you throw 5,000 SUVs into the product mix. While SUVs may be the hot thing today, they might not be tomorrow and once launched, a Ferrari SUV is not something you can undo. Ferrari has done a great job of building shareholder value over the last half decade without an SUV and there is no reason it suddenly needs one now to continue to do so.

SG167

85 posts

79 months

Tuesday 6th April
quotequote all
SSO - enjoy reading your Blog, and great points re Ferrari not needing to do it.

Even if the car is incredible, it's just going to be such an uncool "look at me" car. I know Ferrari's are quite showy.... but most of them are absolutely top of class drivers cars. A Ferrari SUV will just be an utterly soul destroyingly god awful hateful pile of turd

OldAndTired

147 posts

9 months

Tuesday 6th April
quotequote all
One can argue that the market cap of $52 billion is only at that level on the expectation of a move into the SUV market and more?! No sane valuation justifies a price of $5.5 million per car sold unless some serious volume increase is being priced in for the future.

If Ferrari were to announce no SUVs but a big jump in production of their current line up the secondary market would collapse and so therefore would the primary market. And so would the market cap.

It’s pretty much a house of cards whichever way you look it from a valuation perspective unless a huge increase in production is on its way. But anyone who thought Ferrari would remain Ferrari after going public is living in fantasy land.

These supercar manufacturers need to make hay while they can.

As an aside though I don’t think an SUV detracts from the brand. They said that about Porsche and that market still consists of a deep fanatical fanbase who continue to pay silly money for the same car but slightly different year on year out. People just compartmentalise.

Edited by OldAndTired on Tuesday 6th April 17:56

Lee Jones Jnr

966 posts

134 months

Tuesday 6th April
quotequote all
With regards Bentayga sales cannibalising existing Bentley sales, perhaps it actually ‘saved’ those sales as saloons become less popular. I’m too lazy to investigate Mulsanne and Flying Spur sales so it’s just a possibility.

garystoybox

457 posts

81 months

Tuesday 6th April
quotequote all
Good article SSO, but this time I disagree with you. I honestly don’t think it’s a fear of missing out for Ferrari.... more a case of we’d be absolute fools to miss an opportunity to give many of our most loyal and wealthy clients what they want; do it better than anybody else and make a packet of money off the back of it. I think this car will have unbelievable residuals and be very sort after. If they play their cards right and keep production under control (which is looks like they will), this will likely further strengthen brand...

(I still wouldn’t want one though)

fridaypassion

5,477 posts

192 months

Tuesday 6th April
quotequote all
This is a company that licenced a theme park. Making an SUV is not the worst credibility issue they have!

adamellisdj

300 posts

2 months

Wednesday 7th April
quotequote all
Makes me laugh how people get their panties In a twist over trivial things like this.

OP, did you throw away your Ferrari aftershave as well as your cheesy cap haha

ThePackMan

291 posts

30 months

Wednesday 7th April
quotequote all
garystoybox said:
Good article SSO, but this time I disagree with you. I honestly don’t think it’s a fear of missing out for Ferrari.... more a case of we’d be absolute fools to miss an opportunity to give many of our most loyal and wealthy clients what they want; do it better than anybody else and make a packet of money off the back of it. I think this car will have unbelievable residuals and be very sort after. If they play their cards right and keep production under control (which is looks like they will), this will likely further strengthen brand...

(I still wouldn’t want one though)
Agreed, plus Ferrari is a company meaning that it has a duty first and foremost to shareholders.

Fast Eddie

242 posts

209 months

Wednesday 7th April
quotequote all
garystoybox said:
Good article SSO, but this time I disagree with you. I honestly don’t think it’s a fear of missing out for Ferrari.... more a case of we’d be absolute fools to miss an opportunity to give many of our most loyal and wealthy clients what they want; do it better than anybody else and make a packet of money off the back of it. I think this car will have unbelievable residuals and be very sort after. If they play their cards right and keep production under control (which is looks like they will), this will likely further strengthen brand...

(I still wouldn’t want one though)
Like many, I think SSO takes a slightly narrow view although I do agree with the units manufactured and waiting times point albeit they are masters at controlling the s/h pricing which many are not, and that is a part of the supply chain discussion.

A major point missed is the fact that Ferrari is a listed company and the shareholders must be satisfied. In fact, it's the duty of the Board to maximise the price or the large investors, who may or may not care about Ferrari cars, will withdraw their funds.

MingtheMerciless

345 posts

173 months

Wednesday 7th April
quotequote all
I also very much enjoy your blogs SSO, and also sadly must (slightly) disagree with you on one narrow issue - I suspect that the whole game of producing more specials to make more money is not so much over, as more challenging. If you believe the internet blogsters, a lot of people are getting sick of having to take a bath in an 812 and a Lusso to get on the list for the next thing. Maybe at the rarified level of the LaF replacement they will sell as many as they want, but the bottom line needs some volume sales as well. And I don't perceive a feeding frenzy for the SF90 either. So they do need to hedge their bets a little.

Will it destroy the brand? I don't know, as someone pointed out the Ferrari World in Abu Dhabi which is as cheesy and awful as you can imagine doesn't seem to have done so.

Edited by MingtheMerciless on Wednesday 7th April 14:21

WCZ

8,372 posts

158 months

Wednesday 7th April
quotequote all
younger people will appreciate it (but not yet able to afford one yet) and older people will hate it - especially those who are sick of the politics of getting cars from Ferrari recently

MDL111

5,305 posts

141 months

Wednesday 7th April
quotequote all
generally happy with them building an SUV - at least then you can tow your track car with a Ferrari. What is a shame though, is that the FF/Lusso cars are not being replaced as a result.
High-reving, relatively sporty V12 4-seater with 4wd is/was an exceptional product not offered by anybody else.

SSO

1,069 posts

155 months

Wednesday 7th April
quotequote all
Fast Eddie said:
garystoybox said:
Good article SSO, but this time I disagree with you. I honestly don’t think it’s a fear of missing out for Ferrari.... more a case of we’d be absolute fools to miss an opportunity to give many of our most loyal and wealthy clients what they want; do it better than anybody else and make a packet of money off the back of it. I think this car will have unbelievable residuals and be very sort after. If they play their cards right and keep production under control (which is looks like they will), this will likely further strengthen brand...

(I still wouldn’t want one though)
Like many, I think SSO takes a slightly narrow view although I do agree with the units manufactured and waiting times point albeit they are masters at controlling the s/h pricing which many are not, and that is a part of the supply chain discussion.

A major point missed is the fact that Ferrari is a listed company and the shareholders must be satisfied. In fact, it's the duty of the Board to maximise the price or the large investors, who may or may not care about Ferrari cars, will withdraw their funds.
On the BoD and maximizing shareholder return, I did take that into consideration. In the short term I am sure an SUV will boost sales and profitability, however there plenty of other levers Ferrari can pull to do exactly the same thing that have little to no longer term risk to the equity.

Also launching an SUV is not automatic success, especially if it cannabalizing other models in the range. While it has worked well for Porsche and Lambo, Maserati sold more cars in the year prior to launching an SUV than they have in the last two and Bentley sales are essentially flat.

Also on the residuals, I think this is very much an unknown. If a Ferrari SUV gets used the same way most SUVs get used i.e. higher mileage, kids and dogs in the back etc. is it really going to hold value or will they follow a depreciation curve more similar to the Cayenne or Bentayga?

ThePackMan

291 posts

30 months

Wednesday 7th April
quotequote all
SSO said:
Fast Eddie said:
garystoybox said:
Good article SSO, but this time I disagree with you. I honestly don’t think it’s a fear of missing out for Ferrari.... more a case of we’d be absolute fools to miss an opportunity to give many of our most loyal and wealthy clients what they want; do it better than anybody else and make a packet of money off the back of it. I think this car will have unbelievable residuals and be very sort after. If they play their cards right and keep production under control (which is looks like they will), this will likely further strengthen brand...

(I still wouldn’t want one though)
Like many, I think SSO takes a slightly narrow view although I do agree with the units manufactured and waiting times point albeit they are masters at controlling the s/h pricing which many are not, and that is a part of the supply chain discussion.

A major point missed is the fact that Ferrari is a listed company and the shareholders must be satisfied. In fact, it's the duty of the Board to maximise the price or the large investors, who may or may not care about Ferrari cars, will withdraw their funds.
On the BoD and maximizing shareholder return, I did take that into consideration. In the short term I am sure an SUV will boost sales and profitability, however there plenty of other levers Ferrari can pull to do exactly the same thing that have little to no longer term risk to the equity.

Also launching an SUV is not automatic success, especially if it cannabalizing other models in the range. While it has worked well for Porsche and Lambo, Maserati sold more cars in the year prior to launching an SUV than they have in the last two and Bentley sales are essentially flat.

Also on the residuals, I think this is very much an unknown. If a Ferrari SUV gets used the same way most SUVs get used i.e. higher mileage, kids and dogs in the back etc. is it really going to hold value or will they follow a depreciation curve more similar to the Cayenne or Bentayga?
it will depreciate in the longer term, what expensive SUV doesn't? Maybe at first while demand is higher than supply it will hold price or slightly increase on list with those not wanting to wait. I'm sure there will be a day where Ferrari has a non-ICE car, by your logic that would be wrong too? They are simply following the market/demand curve and accepting that a lot more consumers will like it compared to dislike it. My advice is, accept it, get over it.

Ferruccio

1,503 posts

83 months

Wednesday 7th April
quotequote all
SSO said:
Ferrari really does not need to do this. Just finished this blog on the topic:

While not officially confirmed that Ferrari will be launching an SUV in 2022, rumored to be called the Purosangue, it is one of the world’s worst kept secrets. The funny thing is Ferrari spent years denying they would ever launch an SUV. The former CEO, Louis Camilleri, stated that he hated the word SUV and that it did not belong in the same sentence with Ferrari. Other Ferrari executives have stated that a SUV is not part of Ferrari’s DNA and the Enzo would roll over in his grave if it were to happen. Yet here we are. Poor Enzo is being set up to do a 180 and Ferrari’s DNA looks like it’s about to be permanently mutated.

Two questions come to mind; #1 why and #2 is it a good idea? I am sure that Ferrari will issue a very polished press release when they launch the Purosangue which will not call it a SUV and will explain why it is the right move for the Ferrari brand. However, I think the core reasons are quite basic, money and fear of losing out. On both counts, I believe Ferrari is being both shortsighted and misjudging the impact of their brand. It’s hard to argue against the fact that in the short term, a Ferrari SUV will boost the top line. While it might be margin dilutive, on a cash basis, it should add incremental profitability. However, there are easier ways for Ferrari to goose its financial results without having to put the essence of its DNA at risk.

With a near two year wait list, increasing production capacity to meet the excess demand on the existing portfolio would achieve much of the same outcome. Ferrari is also potentially losing a fair number of customers that simply don’t want to wait that long to get their car. Increasing production capacity so the wait list can be brought down to a more reasonable six months would not only increase sales for the few years it takes to ramp up production, but it would also give a long term boast as potential customers who would have walked away in the past, will now stay.

On the “fear of losing out” on the SUV craze, this is where I really believe Ferrari is making a mistake. They can afford to lose out. SUVs are not who they are, and they will detract Ferrari from being true to its core essence. Can Ferrari sell 5,000 SUVs a year? I am sure they can. Could Ferrari sell an additional 5,000 units of other models in the current portfolio if they really wanted to? I am sure they could do this too. While the SUV risks changing the core essence of the Ferrari brand, increasing production of the existing supercar portfolio has little to no risk. What’s driving this fear? Mostly what the Volkswagen Group has done with Bentley & Lamborghini and to a lesser extent Aston Martin. When I looked at the numbers though, the picture on if getting into SUVs is a huge success its not exactly clear cut. Also, it’s important to keep in mind that VW builds the Bentayga and Urus off of the same platform used for the Audi Q7 so the added development cost & complexity on the manufacturing side is fairly minimal.

As Bentley’s annual unit sales are similar to Ferraris, Bentley is an interesting case to look at. In 2014, the last year pre the Bentley Bentayga SUV launch, VW sold 11,033 Bentleys, in 2019 VW sold 12,430 Bentleys of which 5,232 were Bentaygas (I am using 2019 as it’s a cleaner base. 2020’s numbers are distorted by all the disruptions caused by Covid-19). That’s a 2.4% CAGR in terms of units and on a € basis the CAGR is only slightly better at 3.7%. It is not exactly impressive and hardly a major success. Net net, the vast majority of the Bentayga sales came from cannibalizing other Bentley models.

The Lamborghini numbers tell a bit of a different and much rosier story at first glance. I don’t believe it is as relevant to Ferrari given Lamborghinis much lower starting base and weaker brand equity. To give you an idea of the importance of Lamborghini in the VW Group, while even Seat and Skoda’s financial results are broken out, Lamborghini’s are just lumped in with Audi’s. In 2016, the last year prior to the Lamborghini Urus SUV launch, VW Group sold 3,579 Lamborghinis. In 2019, 8,664 Lamborghinis were sold. Of the 8,664 Lambos, 5,233 were Urus’ which would indicate that the Urus brough new buyers into the Lamborghini brand and the volume was fully incremental. The added volume would certainly have been a welcomed by the dealer network and taken Lamborghini from a borderline brand to relevant and more supportable. When looking at shorter term sales trends though, it seems that Urus sales have now flattened and will likely remain in the 5,000 units per annum range going forward. Lamborghini now has a situation where 60% of their sales are SUVs and the way this will change brand perception in the medium to long term is significant. For VW, turning Lamborghini into a SUV brand is probably not a major concern as long as that moves more units. What is also interesting is both Bentley and Lamborghini seem to have topped out at around 5,000 units for their respective SUVs.

So, is selling roughly 5,000 SUVs a year a good business decision for Ferrari? If they need to increase total volumes by 5,000 units, there are a lot of other ways to get there that do not put the brand at risk, add a huge amount of extra complexity to an already highly complex supply chain, and may cause poor Enzo to do back flips. On a purely profit basis, Ferrari will make more money on 500 next generation LaFerraris then it will on selling 5,000 Purosangues. Ferrari’s current market capitalization is $52 billion which means the market values Ferrari at $5.48 million for every car it produced in 2020. No other car company comes even remotely close (next closest is Tesla with a valuation at $1.2 million per car produced). That number will not hold if you throw 5,000 SUVs into the product mix. While SUVs may be the hot thing today, they might not be tomorrow and once launched, a Ferrari SUV is not something you can undo. Ferrari has done a great job of building shareholder value over the last half decade without an SUV and there is no reason it suddenly needs one now to continue to do so.
All depends on the car they come up with, surely?
Could be dull; could be groundbreaking?
A Bentayga is an expensive, fast Q7.
A Urus is an expensive, fast Q8
A DBX is a nice, individual thing, but expensive for what it is.
The LM002 was remarkable. A real, proper Lamborghini.

(The Urus is on the Q8 platform, not the Q7)

Van Dessel

95 posts

22 months

Wednesday 7th April
quotequote all
I believe Ferrari know their market - in my limited social / acquaintance circles I see enough people who love the Ferrari badge (as a badge like Chanel or Hermes) but don't have the chutzpah to drive one of their "real" cars but would be fully happy to spend the money on a SUV which fits their personal school drop-off /country pub/ ski hill image better. That market is MUCH bigger than the real enthusiasts I see on this thread wringing their hands. They know you guys won't leave them due to a 4x4, you can 'compartmentalize' it as someone mentioned.

And then there's the usual trump card of saying "what about the Chinese, Russian and ME markets?" which is predictable but frankly true. Just look at the size of the new BMW grill and that's all you need to know about how seriously European car markers are lazer-focussed on that market. It's happening in plain sight guys, right before our eyes. So have your funeral pyre of branded gear but like a stuck container ship there's a lot of momentum already.

fridaypassion

5,477 posts

192 months

Wednesday 7th April
quotequote all
A fez 4 x 4 will be the ultimate. Why put up with a Urus when you can have the same thing with a Ferrari Badge on it? Bentayga? Pah!