Ferrari Price sensitivity with the 12 Cilindri

It will be interesting to watch. The 12C coupe base price at roughly $505k (10% price increase) is already too high according to most conversations, but we'll see how this plays out.

 

Rob do you think anything anyone is going to pay a single penny over for 12 C? Why would they?

 

Maybe it’s because I’m not excited about the car at all that I can’t imagine anyone even paying MSRP at these prices let alone above. But you are probably right. Someone will pay over.

 

Yes I saw one, the overall shape is ok but I thought the black panels were hideous.

 

I’ve seen the coupe and my dealer let me have it for a weekend. Did I give the car back and couldn’t wait for mine - no! I was surprised that I had no feelings one way or another for the car. I think it’s ok but it’s a big car and all the screens and haptics aren’t my thing. I should note the car I drove was an early Ferrari car that was in-country for a Ferrari driving event so probably didn’t have the latest steering wheel etc. I’m neutral on the looks.

I also don’t think it’s worth the money and Ferrari leave zero on the table for the owner. I can see this car depreciating significantly (depending on market). I have allocations for both coupe and GTS and don’t think I’ll take either - just don’t stir my soul. I own both the 812 Superfast and the 812 GTS and they’re ok for me. I’m more looking forward to my new incoming (next year) V12 which is smaller, lighter and more agile. Just my take and each to their own.

 

Just to chime in on duties, which we have had for years in the UK on non-EU product (and now EU product too). They apply to the landed price of the car, which with 20% VAT is about 50% of the retail price. Then you are able to deduct amounts for insurance elements, such as warranty, from the value in the form of a duty rebate. It’s quite complex but basically a 25% duty applied to landed cost, including all options, gives an impact of about 10-12% at retail. For Ferrari, with large per-unit margins, they would find it easier to absorb some of the cost rather than lose too many sales. There is a calculation to be done because the amount you absorb as a manufacturer applies to every car, whereas the profitability on a lost sale is for the percentage sales you lose only.

For example, if 10% extra retail price drops your volume by 30%, you lose 30% of your gross profit (assume $100k GP per car x 30% of your volume, could be 100,000 x 3,000 = $300m). Set this against 25% duty on landed cost of 3,000 cars, say average $250,000 = 3,000 x $60,000 = $180m. In this example, if the volume drop was 30% then they would absorb the duty. If the volume drop was only 15% they would charge it. By increasing the retail price by 10% they are passing most of the duty on so you know how they see this equation working for them. In other words, they don’t think they will lose enough volume to make it worthwhile not charging for the extra duty.

There is a further benefit. Ferrari residuals have been difficult lately. By charging the duty, everyone’s used Ferrari just got more attractive.

 

Apologies, there is an obvious and careless error in the maths above - 30% volume drop due to a 10% price increase (assuming 3k cars are sold in the US and $100,000 is the gross profit per car) would result in roughly $100,000,000 of lost income. This would be set against the $180,000,000 duty cost of the example if they didn’t pass the duty cost on. So even with a 30% drop in volume, that would not be enough to stop them needing to pass the cost on to the consumer. These figures are for the purpose of example to demonstrate the way they would think about how duties should be handled. They could also partially pass the cost on or do it for some models and not others. But if they want to maximise profit, this is how they will think.