Why has Ferrari abandoned the upper middle class ?

I actually think it's more of a result of the rising number of "rich" customers. Back in the day there were relatively few rich, and amongst those many were extremely wealthy. It would have been hard to build a business catering solely to that population of $100mm+ net worth individuals (in modern day funds).

However nowadays, with the rise of small businesses, the tens of thousands of pre-IPO google, msft, ebay, amazon, facebook, groupon, twitter, apple, etc. etc. multi-millionaires, it's possible for Ferrari to cater exclusively to the $5mm+ net worth individuals out there, because there are so many.

Entrepreneurs have become more business savvy over the years, and more and more standard employees of up and coming businesses demand equity compensation. Whereas look back to the days of Wal-mart and realistically, there were very few billionaires/millionaires made out of that company when you compare it to say, Google, where the masseuse from its pre-IPO days made out with a few million in stock.

I think Ferrari's change in focus is a function of the change in the distribution of wealth that has occurred over the past decade of the internet and technology.

 

My father-in-law almost bought a 308 new in 1982 with cash. I can't imagine him doing anything close to that for today's entry level Ferraris. My first thought is that Ferrari can charge those higher prices and still sell most, if not all of the cars they produce. If they did have more production capacity, I imagine that it would have to be a significantly less expensive car.

 

Great thread, I was thinking, and wondering the same thing. I am single, with a good income, but would rather buy other things than just one car. To me there is no "drive" to attain one of these new cars.

To me, and many of my generation, new cars are like new movies and dvd's :you wait a bit and you can pick them up cheap, and have one at home to use as you please.

So many of these new $100+ cars are sub $40k when they are 3-5 years old its scary.

Why should i buy new?

I think Lotus and Porsche have their ducks in a row. Those are the two makes i most look at as far as "new" goes, not to exclude Maserati as was previously mentioned.

The older GranSports look amazing, and the GranTurismo is a stunner in pics ( never seen a 2002-20?? Maserati in person).

As the market supply and demand cycle sifts the values where they need t be, i think we will see more "normal" people with these cars.

Case in point, I know some really, really happy modern VW owners, who are so smitten, that they are looking to try other European cars, as opposed to Fords or Cadillac. They are the #1 Porsche fans i have met, and they dont even own one yet.


I think many here wish for a "308" for the modern era, but it does not seem Ferrari cares about the lesser masses of buyers. The 458 is stunning, and i hope they make 30,000 of them so I can buy one in 7-10 years !

360's have not yet bottomed out. But to me they are of the "jellybean" era as i dislike the looks of them.


maybe a retro 308 like the Miura that was proposed?

 

There's a major bifurcation underway in U.S. income distributions, so the answer to your original post may be that the affluent middle class is going away at the same time there are many more super-rich in the financial services sector.

Also, as Ferrari tries to remain an exclusive brand, it probably has less interest in tangling with Porsche/Audi and now even Aston Martin in the low $100K price range.

I think Ferrari would sell a lot of $125 sports cars if it went that way. But I doubt they want to. Resale values on the 360 are frankly embarrassing.

 

Yes, Ferrari has abandoned the upper middle class.

Ferrari can sell as many cars as it produces even in times of recession* and can either a) grow the factory and obtain market share exposing themselves to downturns, or b) make more expensive cars and continue selling as many as it cares to make to those well above the middle class and be essentially recession-proof.

Which path would you choose?
Which path would Enzo have chosen?

(*) This depression notwithstanding

 

At one time the California or new Dino was supposed to fill a lower price point but they opted to price the California higher. Now that it's more of a global market and considering their production capacity they probably just want to focus on only those that can really afford to pay for a Ferrari. Nothing new as they've been pushing that "exclusive" envelope for some time now.

 

What you are seeing is the fruition of Montezomolo's vision. Think about it. Under Enzo's control, the road cars were almost afterthoughts. They never had cutting edge technology and while mostly beautiful designs, were not particularly user friendly or reliable and the performance on any objective level wasn't that great either. In fact, Ferrari clung to old tech. How many cars were still using mechanical fuel injection in 1989? In contrast, Montezomolo has kept them on the cutting edge of technology and performance while also making them more user friendly and reliable thus expanding the pool of potential buyers. All this costs a lot in development and manufacture. You can't argue with success. Sales are way up. The products have been pretty uniformly fantastic. The brand is now one of the most recognized in the world. If it hadn't been for Magnum PI, few Americans would have even known what a Ferrari was until about 2000.

Dave

 

Cool thread!

 

greed.

 

I argue the focus is aspirationals in growing markets... and the upper middle class there..

 

I think it is because Ferrari is a brand as much as it is a car. It is something to aspire to. Something expensive. Something exclusive. You wouldn't want to water it down.

So rather than compete in the $100-150K class with the German cars, British cars, Nissan GT-Rs, and all of the others that crowd the lower strata, they choose to elevate themselves into an exclusive price range where the others could not.

For better or worse. I do understand why, but I still wish they could get away with selling a $120-150K successor to the 3x8 formula. But times change.

 

I dont know, my initial thoughts would be that in introducing a vehicle at that price point they are going to be undercutting themselves at this point. Many people would rather be in a used 360 or 430 than in a lesser model Ferrari. There may indeed be a market for the car you are describing, but at the 100-150k price point you can have your choice of really nice cars including CS's and maybe the occasional Scud - I havent checked used 599 or 612 prices lately, but those could be there soon if not already. I am quite sure that FNA would be glad to help you find any one of those.

In the meantime, Ferrari itself can continue to sell new models for above MSRP and remain in its almost recession proof envelope and not compete with itself.

Just a thought - probably not much to it though....




PDG

 

Agreed.

 

I find these kinds of questions so interesting because it's the typical "speak out of both sides of your mouth" scenerio. We want cheaper cars, we want shorter waiting lists, but we want limited production. You don't get all three. Something has to give.

Let's say Ferrari made a 120 grand car.

Well, everyone on Fchat would want them to only make about 2,000 of them for the US market because-- they want exclusivity.

So, what would the price of that car be in reality? $250 grand. Why? Because everyone would want one. The waiting lists would be long and car flipping would be everywhere.

It's about supply and demand, not MSRP.

If you want cheaper Ferrari's, you need more production -- at least 3 or 4 times the quantity because a lot of people would want them. Do we want that? I don't think so.

BTW: Ferrari is NOT abandoning the middle class. There's tons of 360's that are practically new (less than 10,000 miles) that sell for about the same price as a luxury SUV. These are available at many dealers. And, the F430 will quickly replace those in the "less than $100 grand" inventory in dealer showrooms. You want a great car for "the middle class" -- buy a great used car that's still practically new.

If Ferrari has "abandoned" this lower price point category, it's because it can. But, don't blame them. Blame market forces. The same goes for Rolls Royce, Bugatti, Pagani, and other top line luxury makers.

 

So, your company makes a mousetrap. And, it's a really good mousetrap. People want your mousetrap. In fact, it sells so well, you have people lining up to buy them from you.

You could sell it for the same price as your competitors mousetrap but people eagerly offer you twice as money just to get one because they are all sold out.

You invested money to make your mousetrap. You have investors who invested their money in your company in the chance that maybe, your mousetrap would sell well.

So, are you being greedy for selling your mousetrap at a higher price because people will pay it or are you just going to sell it for a lower price and screw your investors because you're afraid of being "greedy".

It costs 100's of millions of dollars to produce a new car model. You have to repay that over the life of the car. If you're only going to see 18 to 20,000 pieces of that model in it's lifetime, you have to pay all that back AND make a profit or you'll be out of business.

I'm always in surprise why so many people on Fchat cannot understand just how few examples this company makes of each model and how that is reflected into the purchase price.

It's not greed. It's designing and marketing a good product that people want and will pay a lot of money to get.

It's doing a good job.

 

I didn't say it was a bad thing....

 

Ferrari is in business to make money, why is this lost on everyone?

 

Maserati is for this price point in the Fiat family. There is a whole plan to cover all budgets in the Fiat Board presentation. I think the California was designed to be a Maserati but was a little too expensive so the design got sent upstream. At least that is what I have heard.

 

It makes all the sense in the world when you think of Ferrari as being the most expensive Fiat.
Let the stoning commence.

 

because the culture/mythology of Ferrari goes far beyond just the business. they are a pop culture icon, and most people will never buy/be able to buy a Ferrari, so they don't necessarily think of it as a business that makes products; it's a brand/lifestyle/ideal.

 

You hit on something right here. The median (meaning as many above this level as below) has been reduced drastically in real terms. Since I assume the mean in real terms is not that much different in real terms (or even greater in real terms), what this implies is an increasing divergence in household income and accrued wealth.

In other words the cliche of the rich get richer and the poor get poorer appears to be true.

So Ferrari artificially limits their production and must maximize profits. Their wealthy customer base can afford to pay more, so Ferrari price their product accordingly.

 

blah blah blah.

Still just cars.

 

how many other car companies have a chain of branded merchandise stores and a theme park?

 

Realistically, who would go to the GM or Ford theme parks??

I only wonder who gets to change the belts in the Ferrari theme park??




PDG