Autos

Ferrari Cuts Sports Car Production to Enhance Exclusivity


Ferrari Cuts Sports Car Production to Enhance Exclusivity

Photograph by Fabrice Coffrini/AFP via Getty Images

The adage “Less is more” isn’t something you’d expect to hear from a horsepower-driven carmaker such as Ferrari, but that’s exactly the strategy the exotic Italian sports car brand is pursuing. While mass-market auto manufacturers fight for market share and upscale leaders BMW (BMW:GR), Audi (NSU:GR), and Mercedes-Benz (DAI:GR) aggressively vie to be No. 1 in luxury car sales, Ferrari Chairman Luca Cordero di Montezemolo is hitting the brakes. The luxury unit of Fiat (F:IM), which makes the $1.3 million LaFerrari hybrid supercar, plans to cut deliveries by 400 vehicles this year, to about 6,900.

It’s a bet—akin to the strategies of Patek Philippe watches and Hermès handbags—that scarcity has more value for “Il Cavallino Rampante” than pushing sales. Shifting down a gear on deliveries doesn’t mean Ferrari doesn’t want growth; it just hopes to sell buyers more than exotic supercars. “We have such amazing customers, including artists and novelists, so I should give them something no one else can provide,” says Montezemolo, 65, at his red leather-topped desk. “Ferrari must stay above other car brands in terms of profit, quality, and exclusivity, but also make money with additional services.”

During his 22 years running the carmaker, Montezemolo has transformed Ferrari into a cash machine, accounting for about 10 percent of Fiat’s 2012 operating earnings. Even selling fewer cars, Montezemolo aims to match last year’s record profit of €350 million ($450 million) in 2013 by increasing licensing revenue and adding more lucrative personalized add-ons for the cars, such as cashmere seats and carbon-fiber liners for the trunk.

Some analysts say Ferrari’s weaker future sales may in fact be less by design than a consequence of auto demand in Italy and Europe sliding to a 20-year low. “Regardless of their decision, they would have lower volume this year,” says Philippe Houchois, an analyst with UBS (UBS) in London. “They are trying to turn that to their advantage.”

Ferrari’s merchandising efforts accelerated two years ago, when Montezemolo hired Andrea Perrone, formerly chief of pricey suitmaker Brioni, as head of brand direction. Last year, Perrone’s division, which includes activities such as licensing Ferrari’s name to the Ferrari World indoor theme park in Abu Dhabi, logged profit of about €50 million on revenue of €100 million. A new clothing line called Pr1ma, which includes €1,500 leather jackets, is also expected to contribute to sales this year. “It’s a collection primarily dedicated to customers who want to wear Ferrari apparel while driving their sports car,” Perrone says.

Personalized offerings on cars—special wheel rims or steering wheel details, for example—add an average of €30,000 to the cost of a typical Ferrari. There’s also a tailor-made program, which can increase the price of vehicles (even the $300,000 four-seat FF) by 30 percent, as personal designers come up with individualized touches. The company’s “Classiche” workshop will even restore models from the ’50s and ’60s to their original splendor.

“Ferrari is not just a car but a compilation of services and branding extension opportunities,” says Armando Branchini, founder of Milan-based luxury consultant InterCorporate and a management professor at SDA Bocconi School of Management in Milan. “Montezemolo made the right choice, following a megatrend of ultraluxury companies.”

Ferrari’s strong performance has made its hometown of Maranello an island of economic growth in recession-wracked Italy. While the country struggles with unemployment close to a 20-year high, the supercar maker is hiring 250 people this year, including 200 to assemble engines for Maserati, another Fiat luxury line. Ferrari employees received extra bonuses of at least €8,500 each in April after the company achieved its three-year targets. Another check may be on the way if its Formula 1 team wins the championship this year.

The bottom line: Sports car maker Ferrari will cut production by 400 automobiles in 2013, but expects to grow, adding 250 jobs.

With Dan Liefgreen and Andrew Roberts
Ebhardt is a reporter for Bloomberg News in Milan.

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  • BMW:GR
    (Bayerische Motoren Werke AG)
    • $94.05 EUR
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  • NSU:GR
    (AUDI AG)
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