812 Market Dynamics

You make excellent points Paul, many of which I happen to agree, the best brands manage their demand. However, I think the full picture still remains to be seen and I just can't believe they are willing to be that short sighted as to let it go as far is it might appear it could. I also think you are dealing with some extra factors such as oversupply to some markets due to changing regulations and changing trade/ politics and also changing generational attitudes towards these cars (front engine design is not viewed as universally favorably as it once was) - But time will tell.

As an aside on Hermes bags, I don't follow such things, but my wife says no longer do they just appreciate.

 

The last few posts make tremendous sense.
But I just dont see Ferrari failing at this. History is on their side.
Perhaps they alienate certain users/markets but growth continues.
As a brand and business builder, I am fascinated to watch where this goes.
(Side note...is it wrong I am not interested in the incoming Pista and have been researching CS and Lusso V12's instead?)

 

I get what you are saying, and agree on some levels. Let the market sort it out. Let's see what happens with this approach.

 

I think Ferrari know exactly what they are doing, and are playing out a very different game plan to the past. In reality they must think they have more than enough global demand for new cars that when anyone falls out of the system there are many more to take their place. They are probably right short term. Where I feel the model falls apart is at retail level, those dealers do not operate with the 20 per cent plus margin Ferrari has, and the secondary and third/fourth owner is where it is in grave difficulty . Dealers are stocked out, and when they stop buying the trade in, the cycle fails. It is a complex and delicate system. I have spoken to far too many dealers globally to think this is a blip. Dealers are in the crap. You can ignore it, hide behind new car demand, but massive depreciation , and it is massive, will not sustain the Ferrari brand as it is. The only way to sell unwanted 812/Lusso/PF is by price erosion. Ferrari has , like all cars , lost money, it is a cost of ownership . But current levels are unprecedented . That is a result of over supply and over pricing. The market has decided, and it has decided Ferrari is too common and too expensive. Fantastic news for anyone who was not on the hamster wheel and now they can buy any Ferrari instantly . No problem with that, as long as everyone understands it. I always say, the product is exceptional, and if you can now buy that exceptional product, with 500 miles on the clock and 6 months old for a 30% discount, what is there to dislike. It is brilliant.

 

Mike,
On behalf of myself, I hereby award you the winner of the Post of the Month, if not the Year!!!! (insert hand clap emoji)

 

Buy any SS Rolex at MSRP, leave your AD and realize +40-50% increase in value. Some Pateks are the same, 5711, 5712 , 5740, and others.

 

Then try to drive with your watch!
If someone wants to make money Ferrari is the wrong thing but if you wanna have fun and emotions you are right buying one.
If you are in trouble with the loss buy a cheaper car.
Just my 2 cents


Sent from my iPad using FerrariChat.com mobile app

 

Not looking to argue with anyone or change minds; just offering my perspective/opinion - one which doesn't come from being a long-time multi-Ferrari car consumer or an appreciation/investment buyer (I only buy for the joy the car brings).

I don't feel that the Ferrari business model is broken. By design, Ferrari has, for reasons of necessity, adopted a business model that accounts for being beholden to not just Ferrari customers (old, new, and prospective), but more recently, Ferrari shareholders. And, it's one that demands, among many things, constant innovation (to stay current and competitive) and increased revenue (shareholders) against a growing and unrelenting tide of regulation and new competition. Look at the number of companies that offer a legit style and performance alternative to the prancing horse these days. In every way, I see that as a plus.

In the early 2000's, I was shut out of any possibility of gaining a Ferrari allocation. I was told I had to buy a used car in their inventory from a different maker (Porsche, Audi, BMW...!) because I didn't already own a Ferrari. In off-putting language, one Ferrari salesman told me that, because I was not a Ferrari owner and I was unknown to him, I could not be trusted and, therefore, would not be eligible to buy a car from him. I was angered by their arrogance to the point that I swore off the notion of ever wanting to own a Ferrari. Childhood dream up in smoke. I hated Ferrari for it. This was the old Ferrari, the only Ferrari I knew.

Hello, Porsche. My next 5 sports cars were Porsches.

Fast forward to late 2017 and the day I saw a properly specc'd 488 GTB on Ebay. From the moment the 488 was launched, I was smitten - taken by the car's beauty - especially the return to the side scoop intakes - and the level of performance that the 488 offered. It was like the car was specifically designed for me. So, I drove my beloved GT3 down to Algar, expecting to have to beg permission to sit in their 488 floor model just to see if I could fit before contacting the Ebay seller. The salesman (Tony Palmer) was as polite and helpful as could be. I told him of my intentions to buy used as I had no Ferrari ownership experience to speak of. To cut to the short, he offered me an allocation. 5 months later (May 2018), I was driving a Grigio Titanio 488 GTB. Dream realized. And, it gets better. A few weeks ago, I specc'd an 812, which should arrive in April/May. And, this past weekend I was offered a chance to test the F8 (wow!) and offered an allocation. This is the new Ferrari.

So, based on my customer perspective (walk in with a wish and walk out with an allocation) and my shareholder perspective - their stock, of which I own an ever-increasing bundle, flirts daily with new highs - I couldn't be more pleased or thankful. Life is good.

 

well written. You are correct, Ferrari dealers have lost the upper hand. Ferrari is focused on the end-user (us) and not the dealers (at the same level as before) About time. There are still dealers who haven't accepted the new reality. Find another dealer.

 

I can't argue that for right now, but it could be what you are seeing ends up being a blip in time. We won't know until more time has passed. I don't see how they could really have a plan that leaves clients and dealers completely out in the cold.

I've also seen this type of erosion before- 599, Scud, etc. I had people telling me this is the time Ferrari has finally lost it.

Then we got swept up into a bubble.

 

At some point the rapid/extreme depreciation of the latest models will change the market for the new cars. For example, here is a perfect spec 812 with sub-1000 miles that will likely transact at a $100,000 discount to list. This type of outsized bargain will likely shift the decision making calculus for many. I still feel good about my 812 purchase; my spec is really option heavy and unique (Cioccolato interior with racing seats). However, when I see great specs with increasing frequency, even otherwise satisfied guys like myself, begin to imagine the possibilities...

https://www.cargurus.com/Cars/inventorylisting/viewDetailsFilterViewInventoryListing.action?shopperListingsSearch=52476245#listing=259169703

 

Absolutely. The balance Ferrari had is gone. People will think twice now before buying a regular prod $450k/$500k when they will drop to $250k within 5 years IF you dont drive it more than 10k miles.

 

Don't think even *once* if this is a concern. Brand new $500k toys make absolutely no sense to own. Unless you know going through the door that this is a toy, not an asset. On the other hand, there certainly are some bargains to be had out there if you don't care about owning someone else's car, even barely new, etc. I realize that comes off poorly but we all have our OCD quirks

Happy Thanksgiving!

 

I generally believe in cycles, too, but this feels very different. The previous 599 / Scud softening happened during the Great Recession whereas this rapid drop in residuals is occuring despite an incredibly bouyant stock market. Ferrari prices and supply have simply risen too far too fast. I fear that it has caused real damage to the brand, and that is not easy for any company to reverse - even one has storied as Ferrari.

We’ll be picking up our TM Pista in a couple weeks. It was supposed to be a halo car. We certainly jumped through a lot of hoops to secure one. Now, it honestly feels like Ferrari has made a gazillion of them. Guess I should have opted for the Pista Spider but that would have required the purchase of an unnecessary Portofino so we declined.

I think we may be finished with buying new Ferraris. The latest models simply don’t interest me much, and the game and repeated financial losses have grown tiresome. We’re happy to enjoy what we already have and let others step up to the plate. There’s a lot more to life than constantly chasing the latest and not-necessarily-greatest new model that’s released every 2-3 months.

 

This 812 looks fantastic!!

 

I agree with you 100% about the increased prices and supply. But to explain the dramatic drop in residuals in a robust economic environment we have now, one also needs to look at the drop in demand. The end of the model line-up, particularly limited editions, means a lot of people have walked away from the recent cars, and the dealers are left holding the can, and I know a few here who are now refusing to take cars in (eg. for a 812 to 812GTS swap). So this weakness is likely to continue. In the meantime, I am going to put some serious miles on my 812 and enjoy it for what it is - a mighty fine Ferrari V12.

 

Or give u a trade/change-over that is jaw-dropping. I really don't think Ferrari has realised how fast the brakes have been put on in terms of people wanting the latest greatest new car.

Even Mac seems to have realised its past model output was way too fast and have slowed down.

 

Excellent points.

I think the stock market does not tell the full picture, but that is for another discussion.

However, I think what you are seeing with Ferrari is a transition between marketing plans, and as such, we are seeing some turbulence. And you're right, the new paradigm might not be as appealing, but its also possible they might get it right. That's why my opinion is we really have to wait and see.

My take on the Scud and 599, yes the great recession was a big factor, but they were actually refining their business program at the time and then boosted by QE as we came out of the recession. To my mind, we could never expect what happened over the past few years to continue, whether they became RACE or not.

 

We may not call it QE any longer, but money is still flowing very freely. Car loan rates remain near historic lows. The US10Y is lower than at any point since 2012. Plus, stock market indices are hitting record highs on an almost daily basis.

It's apparent that potential buyers are suffering from a lack of interest rather than a lack of buying ability. Ferrari has seriously misjudged just how much many customers will tolerate in multiple facets of the "game".

 

You are probably right, and I’d also add that the current ferrari product is not spectacular as it once was. Sure the performance numbers are good but the design is lacking.

 

Agree. Ferrari have said they are slowing down the model releases for next year (only 3? LOL), but that might be too late to deal with the current glut but might help to fix the situation a few years out. When my dealer is asking me if I would be interested in an F8 spider having forgotten I am still waiting for the Pista spider, it says it all really.

 

When they are calling customers to come a test drive the new F8....an eyebrow must rise.

 

Lets just say that's now how it plays to my eyes. I think they are in the process of changing business models due to changes in the market place. That bubble I referred to is what brought new competition in the form of new players and new models and the old model was not sustainable. So, the QE may still be in place, it may even be greater! But I say you are focusing on the wrong part.

The industry as a whole has overshot on demand. Have a look at the inventory building up everywhere- its really eye opening.

Unfortunately, I think the 812 in particualr is getting caught up in these shifts.

As to test drives, ha! I was offered test drives of the following: 430, 599, 458, 458 Speciale, FF, F12, Cali T, 812, F8.....

Come on guys, the world is always changing. Fair enough if you don't like the changes. I'm not happy with all of them but you can't stop it.

 

I, for one, wholly appreciated receiving that call.

 

From what I can tell:

- Ferrari is increasing the number of sports car models and will phase out the Lusso to make room for the SUV.

- Total volume of sports cars may not increase much, however their average price will. Each model will be relatively more exclusive by virtue of their sports car capacity not being increased, but diluted across more models.

- Volume increase will come from the SUV.

- The only limited edition/numbered cars will be in the Icona range, with perhaps a few exceptions.

- The Assetto Corsa pack may mark the beginning of a strategy to offer a harder core track variant at the outset of every new mid engine model launch, at a significant premium to the regular model.

If the above is true, it will be difficult to predict how such a strategy reflects residuals on their sports car range.

Regardless, we can be sure that their strategy has been deeply thought out considering the future impact of demographic, geographic, environmental and competitive landscapes.