The Four Things Ferrari Must Do to Impress Wall Street
Ferrari is in a bit of a pickle as it prepares for an initial public offering. Parent Fiat-Chrysler needs the cash, and public investors will no doubt be keen on the shares, but Wall Street runs on growth. And growth is the kind of thing that can send a luxury brand like Ferrari spinning into a ditch.
In the IPO paperwork Fiat just filed with the SEC, the company used the word “exclusivity” 64 times. In short, if Ferraris are everywhere, they won’t be worth nearly as much 1 . Indeed, production has hovered somewhere around 7,000 units for years, and the company said that manufacturing would creep up to only 9,000 units by 2019. Imagine how frustrating it would be for Apple to hit its massive expectations every quarter if it had to cap the number of iPhones it cranked out.
There are, however, some alternatives for Ferrari executives. The IPO prospectus outlines four paths to more profit that don't involve more cars. If the Prancing Pony is going to survive on Wall Street, here's how it will have to do it:
1) Lots and lots of swag
Stamp it and sell it. There are 32 stores around the world selling a range of Ferrari-licensed goods, from surfboards ($1,389) to steering wheels ($4,550), and enough red leather to outfit a Fifty Shades of Grey-themed sex shop. Nine of the shops are owned by the company itself 2 and then there's the web store, which boasts 400,000 registered shoppers. The best alternative to cranking out more $480,000 supercars may be ramping up production on $480 electric replicas for toddler drivers.
2) Emerging markets
Finding new territory has become a common way for luxury brands to sell more stuff without saturating markets. It’s why Rolls-Royce opened a dealership in Vietnam last year. Ferrari has a lot of room to accelerate on this front. Most notably, only 9 percent of its cars were shipped to China last year, even though many of its ultraluxury rivals now sell almost one-third of their cars there.
3) More exclusive models
Ferrari recently collected somewhere around $1.4 million for each of the 499 LaFerrari cars that it built, and the speed-machine provided even better margins than standard models. It’s a sweet bit of economic torque: low volume, high value. It’s also a strategy that Ferrari can employ a little more often without making buyers feel that their limited-edition vehicles are somehow less special.
4) Going bespoke
Adding personalized touches to a Ferrari adds up. According to today's IPO filing, adding an extra dash of carbon fiber here and a cashmere armrest there adds, on average, 15 percent to the price of a car. Ferrari calls it the “tailor-made” program, and it’s another page taken right out of the Rolls-Royce playbook. The more Ferraris that get the custom treatment, the more standard models the brand might be able to get away with making.
In 2013, Ferrari cut production 5 percent and profit surged 9 percent.
The rest are franchised.