Ferrari sales over 5000 units in 2005...

More than 5000 cars?
This is where it all goes wrong!

 

30 new Ferrari's sold in The Netherlands last year.

 

thats why some gents moved to LAMBORGHINI !

 

Yes, that is very true! Although I also want to see what happens with Lamborghini now that they are connected to Audi. How many Gallardo's are produced in a year?

 

Yes, Lamborghini did a big fault with the Gallardo overproduction!
They have been forced by Audi to built and sell a huge amount of Gallardos (understandable cause most of the Gallardo is built by Audi in Ingolstadt).
Well, they have learned their lesson and its back to a regular production number.
The Murcie is till hard to get and you are on a waiting list.

Back to Ferrari......overproduction:
Thats why I dont like to go to the Racing Days!!!!!
It looks sooooooo boring to see 100 x 360 Modena, 40 x 360 Spider and xxx 355er - this was in 2004.
Now in 2006 at the RD`s.......same as above + xxx 430 in a row.

Ferrari is IMO on the way to lose their exclusiviness & rarity!

.....my 0,02 cents

 

I won't better when the new Dino is launched

 

I agree! The amount of cars at the Racing Days make the whole Marque less exclusive.

 

Well of course, when you take a look at all 5.000 cars all at once, it doesn´t look particularly exclusive, but 5.000 cars worldwide in one year, is still a pretty small amount and not all that bigger than Ferrari has done in previous years. That´s to say, not big enough to question Ferrari´s exclusivity. Besides, the economic development´s in the world market (Eastern Europe, the far Asian countries opening up for exclusive item´s from the wealthy West, markets Ferrari didn´t really have to supply in the past) just gives Ferrari and her competitors a bigger playingfield, which inevitably leades to bigger production.

I´m happy to see Ferrari do well.

 

This is a dangerous slope, with potentially catastrophic consequences. Let's say that the new "Dino" will push numbers to well over 10,000 cars per year. This will require investments for a new, high-capacity, automated (and high-cost) production line. Such a production line will require a certain output to remain profitable. Also, the supplier chain for a "cheaper" Ferrari like the Dino will only work as long as numbers are high.

But let's suppose there is a sudden slump in market demand (like there has been in 1974, 1982, 1992-1994, 2001...) - the first cars to be hit by a crisis will be the "medium-priced" sportscars. Ferrari would find itself with an expensive high-volume production line sitting idle and eating away the profits of the more expensive, "hand-built" models which are more flexible in the production process and do not require big numbers to make profits. At the same time the suppliers for the Dino would keep on supplying parts at the agreed prices for an agreed volume - which means that with lower production numbers they would either increase unit prices or Ferrari would be forced to over-supply itself with parts it doesn't need. Either way, the few Dinos that Ferrari could sell in a crisis period could even become UNPROFITABLE! This in turn would sap cash away from the planned upgrades of the high-end models, which would in turn become obsolete and lose buyers.

This downward spiral could end in total disaster and bankruptcy. Lamborghini and Maserati have been through this several times in their history already - overcapacity, market crisis, expensive production facilities, obsolete models, no money to develop new ones, dwindling sales => bankruptcy.

Porsche learned about this the hard way. When the 911 was fairly obsolete and worldwide sales of the 924-944 suddendly stopped in the 1992 financial crisis, Porsche came very close to bankruptcy. And we're talking Porsche, one of the most efficient companies in the world!! After this close shave Porsche eliminated the 944, concentrated on modernizing the 911 at regular intervals, and introduced the Boxster by cleverly using many common parts with the 911.

I can't see the Dino sharing many parts with the F430, otherwise it would cost too much; and with Maserati now out of Ferrari I really think the Dino would be a risk as a stand-alone model which would require enormous investments which could suddenly turn into a money-drain at the onset of a market crisis.

Ferrari, don't do this!!! Being profitable is NOT about making more cars - it's about making the cars people want in numbers low enough to keep a healthy order book under any weather.

 

Awesome great post Andrea!
Post of the Month!
Very well and true focused about Lamborghini, Maserati, Porsche......they should have learned from their/others faults and disasters!

 

too many imo....

 

We don't know anything about the Dino yet. Production isn't even confirmed yet. It could well become a productionversion of the Alfa Romeo 8C Competizione. We also don't know anything about Ferrari's current productioncapacity, or even what investment will be needed to upgrade this capacity, nor do we have any idea on in what numbers the new car should be produced.

Economy is picking up world wide, Ferrari has new markets in the far Asian countries and is having a 92% sales increase in Eastern Europe and you are talking about a crisis? Making investments is always with risk.

Jumping the conclusions.

well, the 206/246 GT Dino didn't put Ferrari into bankruptcy. On the contrary!

The audience doesn't accept other Porsche models accept the 911. Not so for Ferrari. The 206/246 Dino was and is a big hit.

I agree that Ferrari shouldn't be downscaling to a model under the F430. The F430 is fine as an entry model. Anything below should be made into an Alfa Romeo or Maserati, but if it would be a Ferrari, then a lot would need to happen before it would make Ferrari go bankrupt.

Being profitable is about selling Ferrari's. Once Ferrari has to conclude that they could sell far more cars than the 5.000 they have sold last year (and I suspect they could), they should go on and build more expensive cars, rather than to do the opposite, but not because it would make the go bankrupt.

 

The message reads 5000 cars sold, isn't the production figure something else?

 

I read also that Ferrari is gonna rise their prices a lot.

Now the balance between offer and demand is out of line.
Making their cars more expensive (read: more exclusive) would help the whole situation.

Now there are always stupid waiting lists and total years of productions are sold after the first day of introducing.

 

My comments on your above comments:

World economy may be picking up now, but it is reckless to overextend ourselves when we know for sure there will be another economic crisis in the next 10-15 years. There have always been cyclical crises, it's a characteristic of capitalist market economy. The trick to survive a crisis is not to be overextended with long-term, high-cost investments which could become unsustainable in a weak market.

About Porsche: there was a time (the 80s) when 944s were selling like hotcakes alongside the aged (at the time undeveloped and rather crude) 911. In those days 944s were selling really well - until the financial crisis hit hard. Sales dried out, and Porsche found itself with an "enthusiast" model (the 911) which badly needed a modernization, a dying model (the 944) and a "dead" model (the 928) on which they had invested highly for very little return. Was Porsche overextended? For sure! They had 3 model lines with very few parts in common, and thus very expensive individual production lines and supplier chains sapping away the cashflow. They only survived by doing the right thing - killing the deadbeats and concentrating on modernizing the really profitable line - the 911.

Being profitable is NOT about making more Ferraris. A car to be profitable must coss LESS than what you sell it for. And in a crisis, a medium-volume product like the Dino will see its margins very quickly eroded as sales figures go down. In order to be sold at a competitive price the Dino will need to have an optimized production process and suppliers geared up for a certain volume to keep costs down. It could easily turn UNPROFITABLE as unit costs would soar if market demand became weaker. It would be an unnecessary risk for a healthy company like Ferrari to over-invest in fixed-cost infrastructures that will become unsustainable overheads during a crisis.

My mantra remains the same: make LESS cars than you have customers for, and you'll ensure a healthy order book to protect you against bad times.