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Monday, February 6, 2023

Ferrari (RACE) Enjoying Inaccessibility As Growth Driver, But Will It Continue

Ferrari N. V. (RACE) stands out from the rest of the automotive market, making its cars sell well in all circumstances.

It is not enough to only spend more than $320,000 to purchase a Ferrari (the average price of a Ferrari in 2019). The customers also have to confirm the history of previous ownership of at least one used Ferrari to become the owner of such a vehicle, and then wait for a long period of time for the chosen model to be shipped. In both new and used cars, Ferrari’s exclusivity retains a strong interest. For its customers, Ferrari has established an exclusive club, whose members receive invitations to events around the world, announcements of new Ferrari models, etc. But becoming a member of this club is not easy, as Ferrari offers only a limited number of available cars for sale.

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Ferrari still has a long waiting list, which has been more than 12 months in recent years due to the essence of the business model. Also in tough times, such as during the COVID-19 pandemic this year this still means that the organization generates revenues. In the third quarter, Ferrari deliveries decreased by just 6.5 percent year on year to 2,313 vehicles due to the forced pause in production. Revenue dropped to EUR 888 million by just 3 percent. But due to the large number of high-margin models in the revenue structure, net profit rose to EUR 171 million in the third quarter.

Ferrari’s gross margin has risen from 47 percent to 52 percent over the past seven years. The cause is the rising cost of automobiles that do not lose their appeal. In addition, clients are able to wait several months, expecting to get a specific product.

The challenge for Ferrari may be the large number of electric vehicles, which also include luxury models. In this situation, a negative signal to investors is likely to be a decrease in waiting time while preserving the production rate. The average waiting time for many years is over 12 months and has not yet been reduced.

Ferrari N. V. (RACE) stock was 2.33% to $210.34 at close of the weekend session on Friday.

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