No one does it like Ferrari. I don’t think Ferrari makes the best cars, the best-looking cars, or even the most interesting cars. If you think of Ferrari as a carmaker, you kind of miss the point. Ferrari is a luxury brand, and even though it’s seeing softness in the carmaking business, it’s still excellent at mythmaking.
The Morning Dump isn’t going to be about global trade because, frankly, I am tired of writing about global trade every day. Instead, allow me to dust off an old vinyl record I haven’t played in a while: Chip shortages. This isn’t about the pandemic; this is about politics.
And speaking of politics, I guess I need to talk about Tesla’s big earnings report and what it’s going to say. That’s also what the company’s CEO should be talking about. Instead… the CEO is calling the Secretary of Transportation “Sean Dummy.” Oh boy.
While we’re deep in that, Audi has created its own entirely avoidable political problem.
How Ferrari Attained ‘Exclusiveness Bordering On The Unattainable’
Ferrari did a big presentation earlier this month wherein Chairman John Elkann outlined what the future of the company was likely to be. He talked a lot about technology and brand building, but all markets heard was “a compounded annual growth rate of ~5%.”
When financial bubbles burst and speculation goes awry, it’s not always because companies perform poorly. Ferrari is an outstanding company and has provided a great return for anyone who purchased shares early. What sometimes happens is that investors get hyped about an investment, and there becomes too large a gap between the present value of the company and the projected value.
Think about it this way: You invest $1,000 into Company A by purchasing 10 shares at $100 a share. After ten years, the company is worth $200 a share, meaning you’ve doubled your money over that time. However, there’s a cost. That $100 could have been invested in Company B, which grew from $100 a share to $300. It gets more complex than this (especially if the companies are issuing dividends), but it’s just a reminder that investors are always looking for the most efficient allocation of capital (relative to how conservative they are).
When Elkann came out and said he expected a 5% CAGR, markets flinched. Those are good numbers, but they aren’t amazing numbers. Was the company’s value (relative to what it is saying it is going to return) that good? Ferrari makes a fraction of the cars VW makes, but Ferrari has a valuation that is 34x what it earns, compared to about 4x for VW.
Analysts, though, are saying don’t freak out. Ferrari is still valuable, and most analysts surveyed by Bloomberg say they still recommend the stock as a “buy.” Why?
While investors were spooked by the firm’s forecast of 5% top-line growth by 2030, analysts are undeterred, drawing comparisons between Ferrari and luxury stocks such as Birkin bag maker Hermes International, given the carmaker’s long order backlog and the scarcity of its products.
Morgan Stanley referred to the brand having “exclusiveness bordering on the unattainable,” while UBS Group AG spoke of a “compelling buying opportunity.”
This month’s slump “wasn’t nice, but it doesn’t change my opinion on the stock,” said Flavio Cereda, a luxury brand portfolio manager at GAM UK Ltd. “I would be buying stock, if I were not a shareholder already.”
The perception that Ferrari is as much a luxury brand as a carmaker has helped the shares command a premium valuation to peers.
Ferrari is amazing. I’ve talked about it before, but Ferrari sells an image as much as it sells actual cars. It’s an image of exclusivity and high fashion. It’s not that Ferrari makes more money from selling its F1 image and its luxury goods, because it doesn’t:
It’s because the fashion and the F1 of it all is key to the aura (and growth, you’ll notice that non-carmaking revenue has grown to almost 15% of net revenues). Making cars is hard, but Ferrari is valuable because crafting exclusivity is way harder.
As the company warns in its filing:
Any failure to preserve and enhance the value of our brand may materially and adversely affect our ability to sell our cars, to maintain premium pricing, and to extend the value of our brand into other activities profitably or at all.
More broadly, our lifestyle strategy will significantly increase the deployment of our brand in non-car products and experiences, including a large variety of Ferrari-branded accessories and apparel. If this strategy is not successful, our brand image may be diluted or tainted. We selectively license the Ferrari brand to third parties that produce and sell Ferrari-branded luxury goods and therefore we rely on our licensing partners to preserve and enhance the value of our brand. If our licensees or the manufacturers of these products do not maintain the standards of quality and exclusivity that we believe are consistent with the Ferrari brand, or if such licensees or manufacturers otherwise misuse the Ferrari brand, our reputation and the integrity and value of our brand may be damaged and our business, operating results and financial condition may be materially and adversely affected.
Do I entirely get the luxury thing? I do not. It is fashion, and I am Anne Hathaway at the beginning of The Devil Wears Prada. Some modern Ferrari fashion feels like this guy I kept seeing at Pebble Beach last year:
A lot of it reminds me of Dan Flashes. But that’s just me! Some people seem to like it.
Chip Shortages Come Again
I think I jinxed it by noting earlier this week that chip shortages were in the past. For most automakers, that’s probably the case, but anyone who relies on chipmaker Nexperia might experience some issues.
Is the company experiencing production problems? Nope. It’s all about politics, as Nikkei Asia reports:
The turmoil began when the Netherlands’ government invoked the country’s Goods Availability Act to intervene in the operations of Nexperia, based on its judgment that there were “serious governance shortcomings.” The chip manufacturer, headquartered in the southeastern Dutch city of Nijmegen, had been acquired by Shanghai-listed Wingtech Technology in 2019.
In a letter sent to the Dutch parliament on Oct. 14, Economic Affairs Minister Vincent Karremans said the “exceptional” decision was made because the company plays a crucial role in the Dutch and European semiconductor ecosystem and constitutes “great economic security importance.” He said the shortcomings included “the improper transfer of production capacity, financial resources, and intellectual property rights to a foreign entity owned by the CEO and not connected to Nexperia.” Zhang Xuezheng, the CEO and the founder of Wingtech, was suspended as a director of Nexperia and ousted from his top executive position.
In apparent retaliation, Beijing has begun prohibiting Nexperia’s China arm and its subcontractors from “exporting specific finished components and sub-assemblies manufactured in China,” according to Nexperia.
Not only is the world round, it’s full of countries with competing interests. While global trade is a net good, ignoring the aggressiveness of Chinese industrial policy was probably a bad idea. There’s a difference between free trade and fair trade, and that difference is especially important when it comes to critical industries.
Elon Musk Is In A Fight With The Secretary Of Transportation, And It’s About As Childish As You Might Guess
I really should be talking about Tesla’s financials ahead of the company’s Q3 revenue. Did a huge increase in sales at the end of the tax credit result in improved revenues? Is the margin going to fall? Are investors going to set up CEO Elon Musk to become a billionaire? I’ll have better answers tomorrow.
In the meantime, Musk is fighting with interim NASA chair and current Secretary of Transportation Sean Duffy over space. Specifically, Musk appears to be mad that Duffy is open to opening up contracts for the re-exploration of the moon after delays from Musk’s company SpaceX.
A spat over the future of NASA under the Trump administration went public on Tuesday, with Elon Musk panning Transportation Secretary Sean Duffy as having a “2 digit IQ” and advocating for his ally Jared Isaacman to run the space agency in a string of social media posts.
“Should someone whose biggest claim to fame is climbing trees be running America’s space program?” the Tesla and SpaceX CEO asked in a poll on X, referencing Duffy’s prior career as a professional lumberjack athlete. One of the listed choices: “Noo, he need moar brainz!”
It gets more complicated than this. Duffy seems to want, according to a Wall Street Journal report, to lead NASA and roll the agency into the Department of Transportation so he can stay in charge of it.
All of this is important and, at the same time, ridiculous. It’s what happens when the unaccountable power of someone like Elon Musk collides with the unrestrained ambition of someone like Secretary Duffy.
When it comes to space, I always look to see what reporter Eric Berger has to say. His report in Ars Technica gets to the heart of the matter, which is that space is important to President Trump, and Duffy seems disinterested in giving up the limelight:
Duffy has appeared to enjoy the limelight that comes with leading NASA. In the future, one source said, “Duffy wants to be president.” The NASA position has afforded him greater visibility, including television appearances, to expand his profile in a positive way. “He doesn’t want to give up the job,” the source added.
A Republican advisor to the White House told Ars that it is good that Duffy has moved beyond his rhetoric about NASA beating China to the Moon and to look for creative tactics to land there. But, this person said, the mandate from the Trump administration is to dominate the emerging commercial space industry, not hand out large cost-plus contracts.
“Duffy hasn’t implemented any of the strategic reforms of Artemis that the president proposed this spring,” the Republican source said. “He has the perfect opportunity during the current shutdown, but there is no sign of any real reform under his leadership. Instead, Duffy is being co-opted by the deep state at NASA.”
The “deep state at NASA” is a thing now? These are not serious people who have very serious jobs, and I kinda hate it.
Audi Has A Woman Problem
Audi is a company in trouble, and companies in trouble tend to compound their problems. Emergencies beget emergencies, and it takes steady and calm leadership to address the long-term issues while dealing with a constant stream of short-term challenges.
Case in point: Audi is being dinged for losing its last woman on its board. The company is losing its procurement chief, and while there may be a good reason for her departure, it’s creating new problems as Manager Magazin reports:
Renate Vachenauer had repeatedly been criticized within the company. For example, deliveries of the new Q5 SUV were recently delayed due to a supplier’s lack of parts.
Without Vachenauer, however, the car company is violating a – actually self-evident – corporate governance rule: there are no longer any women on the board. A little over a year ago, sales director Hildegard Wortmann (59) had to leave – and was replaced by a man, Marco Schubert (51).
It won’t be easy for Döllner to solve the women’s problem. He brought in Schubert and Bouqout himself, and Chief Production Officer Walker and Chief Financial Officer Jürgen Rittersberger (53) are considered unchallenged.
In addition to being a bad look, the reality is that having diverse viewpoints is important when you’re selling a product to a wide range of customers. [Ed Note: Believe it or not, but Germany actually mandates that companies have at least one woman on the board of large companies. -DT].
What I’m Listening To While Writing TMD
Picking out one KISS song to mark the passing of Ace Frehley is impossible, so let’s just enjoy “I Was Made For Lovin’ You” together.
The Big Question
What was the last Ferrari you cared about?
Top photo: Ferrari
The last Ferraris I cared about were the FF and GT4C Lusso. I love fastbacks and the entire concept of a hot hatch supercar. Those were also the first Ferraris I’d cared about since the Enzo, which I really only cared about because it was THE bedroom poster car when I was a teenager. I maintain to this day that the Enzo’s design is absolutely revolting.
The FF and GT4C also still had ties to the Pininfarina lineage. They weren’t designed by them, but they were derived from a car that was, the F12 Berlinetta…and I am one of those insufferable people that can’t stand anything Ferrari has designed since the split. Their current designs are way too gaudy, way too busy, and often don’t even feel like they’re connected to the company’s lineage.
My opinion does not matter because I will never be able to afford a Ferrari and no one at that company or anyone who buys their cars would so much as spit on me if I was on fire…but I really have less than zero interest in the company or its absurdly snobby attitude and following. I get that even Enzo himself was a massive unapologetic asshole, but even if I had the money I wouldn’t put up with a company that actively scoffs at 99% of humanity.
I’d take my business to Lamborghini, where they’d immediately let me buy whatever the hell I want, paint it bright metallic pink for me, and encourage me to drive it with bad intentions. Cars are supposed to be fun.
I think Ferrari is caught in a loop of “idiots are paying idiot money for even our used laundry, therefore we need to keep tightening our exclusive branding so idiots think we are ever more desirable, and pay more idiot money.” This is a well-proven strategy, but you have to have an exit plan because eventually you run out of idiots, the idiots run out of money, and things go south very quickly. As far as I can see, Ferrari really doesn’t have that exit plan. They sorta appealed to the gucci soccer mom demographic with the Purosange, but frankly they don’t make enough of them to serve as a backup plan.
And yes, I agree Lambo is way cooler precisely because they are accessible.
I disagree. Idiots are a renewable resource. We will never run out.
True, but the next generation of idiots will buy like, gold-plated Labubus or something instead of Ferraris. Continually marketing to idiots is a very difficult thing, because they don’t operate by any rational principles.
The last Ferrari of interest to me would probably be whatever was the last one to come with a gated manual transmission
The 599 and California were both sold with one in 2012, the last year of the manual.
Detroit Rock City (R, 1999)
Now, last week I’d have told you the 458 or the F12… but y’know, I happened to see a 12Cilindri in Scottsdale and you know what, that made me feel a way I wasn’t expecting.
I wish I could attach photos. They really are magnificent.
They have something special in person that didn’t come across in the photos I’d seen.
My experience with most of these cars is that’s true.
Chip shortages will happen periodically no matter what. It’s a high capital, low margin, competitive industry with national security implications. Furthermore, as cars become ‘software defined’ and/or more electrified, semi-conductor reliance will only increase. As such, the industry is always going to experience spasms of one sort or another. Disease, disaster, fires, and egos will cause disruptions. I just hope the auto industry has a long enough memory to avoid the kneejerk follies of 2020.
Except this particular shortage is 100% man-made and caused by the Trump admin.
I fully agree. Hence the Egos reference.
Did I miss something? What does the Dutch Government taking action against a Chinese company doing shady things have to do with Trump?
Because the Trump admin told the Dutch government to do it.
Hmm, so the Dutch government was either too incompetent or more likely too scared to crack down on a company doing illegal things without being told by Trump?
Crockett’s “Daytona”. I never warmed up to the Testarossa after Season 3.
100% agree. I think the Testarossa would have been better if it wasn’t white.
Apparently it was Michael Mann’s insistance on unusual colors – he refused to go with the classic red.
I was always more of a Lamborghini guy growing up, but Ferraris were definitely cool and a new model release was always a big talking point. I live in an area where you don’t see exotics often so it’s still an event when I see one of any brand.
But I’ve become increasingly disinterested in Ferraris in particular over the last 20 years. I don’t know specifically why, it’s probably a combination of things, but one thing in particular is just how expensive they are now.
I don’t mean the new ones necessarily, but the old ones too. I remember not long ago you could buy a 308/328 for the mid- to high-$20K’s, and at that point I could browse listings and say to myself, “yeah not now, but in a couple years, maybe?” So it was something I could kind of aspire to. Now however, even 308’s have seen values just skyrocket to a ridiculous point there’s just no way, and even if I could there’s no way I could get that by my wife. I’m at an age now where I’m seeing the writing on the wall and an exotic like that – even a decades old used one – is just not going to be feasible unless there’s a sudden, unexpected, major shift in my financial fortunes. Same thing has happened to air-cooled 911’s, and Lotus Esprits (my childhood dream, sob).
So at this point Ferrari is about as relevant to my automotive pipe dreaming as Koenigsegg is. There’s no conceivable point of entry, ever, so why should I care? For this reason I’d say, like others here, that the last Ferraris I cared about were probalbly around the F355/Maranello period. It doesn’t help that they kicked out Pininfarina and modern Ferraris look (if we’re being completely honest with ourselves), kind of uninspired.
Maybe I’ve just aged out of it, I dunno.
The company is a a pathetic relic of what it stood for. Dining out on its good looks? More like leaving an empty chair at the dinner table and pretending Enzo is sitting there.
Enjoy your EuroTrash[tm] Ferrari sunglasses.
Ferrari is like the Uncle Rico of the super car world, and I feel like they know it. Peaked in high school.
Do Harley Davidson and Ferrari have the same business plan?
Sell t-shirts first, and sell vehicles second.
Though HD, based on looking around, has much much less cachet to lose when someone wears their brand on America’s Most Wanted.
Unrelated, buy why is no one talking about Dan Flashes in the comments? I mean, you walk by a store and you see 50 guys who look just like me fighting over very complicated shirts, you go in. Yes, you do. You go in.
I’m too tired from not eating. B/c THE SHIRTS!
I’m not a fan of Elon but he might be right about Sean Duffy. This is a guy whose career literally started with dancing on reality TV with a sock on his junk.
Lumberjack competitions sound way more appealing to me than going into politics.
I would totally have done that, too, if I was fit enough.
Everyone needs a hobby, and it’d be amazing if it lined up with getting paid.
Especially when you caused it in the first place and have no desire to solve it.
The California. Sure, a lot of people see it as lesser than Ferrari’s sports cars, but it has enough performance for me and is presumably far more comfortable than any other Ferrari product. It is also a very nice looking car. Overall, I think it is the Ferrari I would enjoy most. It doesn’t hurt that it is reasonably priced – I see good examples in the mid-70s and these continue to depreciate. I might consider one in a few years if prices go down a bit more.
Excellent choice. I like ’em too – a nice contemporary evocation of the firm’s now-distant past. I just wished there’d been a manual available, as why not on a not-totally-performance Ferrari?
A manual California would be great. Apparently a 6-speed gated manual was available from 2010 to 2012, although Motor Trend reports that only two were actually sold. So for all practical purposes they don’t exist.
Wow – I had no idea, I always thought they were DCT autos only. And double wow, as it really shows you where the average Ferrari buyer’s mind was, even back then – less interest in the actual driving of the car, more interest in being seen as someone who drives a Ferrari.
I like the California but I think the Portofino looks better.
The Portofino is a very nice looking car. I’m not sure which one I like better, but I like that the California is a lot cheaper.
Last Ferrari I cared about? Maybe the 365
Last Ferrari I cared about was probably the 288 GTO or the F40. Maybe the Maranello. Since then, they’ve mostly been kind of meh. Impressive vehicles from a technical standpoint, but no longer anything I’d aspire to own.
Not sure if that’s just me growing up, or me realizing I’d rather own a car than have it own me.
Now, if I actually had silly money and was in the market for an exotic, I’d probably be shopping for a McLaren. They seem more in line with what Ferrari used to be.
A hotelier in our small town has a Ferrari. Not for any sporting pretensions, just to signal wealth. I don’t care about a model from the brand.
I suppose I do enjoy StanceWorks’ Ferraris.
Re Ferrari, isn’t this basically what Harley Davidson has been doing for how many years now? It’s a lifestyle company that also makes some motorcycles.
It’s been pointed out that much of our virtual, digital world ends up being dedicated to discussing our actual, more or less analog world. But there’s nothing that says it has to be a one-for-one match, so unsurprising perhaps that firms would seek profits by minimizing the real stuff in favor of virtual. Even at $100 a polo shirt or whatever, more people can afford it than an actual car, take pics of themselves wearing it, etc.
Ferrari is not an anomaly; the vast majority of purchase decisions are based primarily on fashion.
It doesn’t need to be a specific brand or even product but variations within an individual product. Fashion items tend to bring much higher margins because they are impulse purchases for which people often overlook the need for a good return on their spending. High trim level pickups are the best example. Even a base model truck will do all the things required for anyone who truly needs a truck. But base trucks don’t sell outside of fleets and a loaded truck will cost twice what a base model will. All of those options and big chrome badges are purchased for the same reason a playboy in Monaco buys a Ferrari. Social signaling, aka fashion.
The same thing is true for all the performance models where people spend money on capabilities that can never be tapped anywhere but a track that they will never visit. Almost every Corvette, M3, and Mustang GT is purchased for the same reason as a Ferrari, just with a smaller bank account.
It all starts and ends with the 308 for me. Second would be a 365 GTB Spyder.
I dunno,maybe the 458? Definitely the 355. And I think the Roma is exceedingly pretty but I don’t really care about it. I got waaay more excited about seeing a pristine Audi GT Coupe on the road a few months back than any Ferrari in I don’t know how long.
The last Ferrari that I actually cared about to the point of wanting one was the 550/575. Classic looks, right layout, was actually semi-attainable back in 2005 or so…
10/10 agreed. 550 is my dream car currently. I’m 42 now, so it’ll probably remain a dream car forever.
It’s mine too. At 70 the likelihood of ownership is even worse than yours.
A a small boy the Ferrari in Magnum P.I. was cool. Since then I have failed to care.
What was the last Ferrari you cared about?
I still want a 550 Maranello, but I will never be able to afford one now.
To be honest, I have cared less and less for Ferrari even as a halo “I’d love to be able to afford one of them one day” brand every passing model they’ve released since the 355 and 575. Everything since then seems like they’re trying too hard, losing their sense of self along the way. Even the 360 seemed like it lost a little of the edge that the 355 had. I don’t know what it is, it’s just getting less and less interesting with each passing year.
I feel like McLaren is better at being Ferrari than Ferrari is.
I saw a 296 GTS parked on the street in Palo Alto on Saturday, and while it was “pretty” I can hardly say it wowed me. I think in part we have reached supercar saturation– there are just too many fast looking cars from too many brands floating around these days and we’ve sort of become immune to being impressed anymore.
I do sort of agree on part of that. Supercar saturation could be it, but at the same time, seeing a Lamborghini *anything* aside from a Uterus makes me stare for a second, the same way Ferrari used to. Same with McLarens. Hell, same with any Viper that’s not an RT/10. Ferrari just seems to have taken on the persona of the middle aged man that was the star quarterback in high school, but peaked there and is still trying to remain relevant.
I find them to be beautiful and especially the call out to the 250 LM in the rear quarter scoops.
McLaren is an interesting case. I have zero experience with them of course so could be completely wrong, but they always strike me as technically amazing but near completely soulless. They seem to exist like something Tron-like, out of a video game – pure stats in physical form, but from the begining created to be something unobtainable.