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
“Ferrari-branded accessories and apparel”
Stuff like this makes me glad I’m not rich enough to participate in this kind of stupidity. Wealthy sheeple are the saddest of all…
Ferrari 365 GTB/4 Daytona
As an enthusiast with blood that is Rosso Corsa, I follow Ferrari quite closely.
However, their recent design trends are disturbing and disjointed in a way that makes Sergio Pininfarina spin in his grave. Enzo’s spinning is likely enough to power all of Modena if you put a dynamo on his casket.
The last truly gorgeous and timeless Ferrari was the 458. Most of the ‘analog cars’ before it were equally stunning.
However, as a fashion brand, you will notice that their automotive styling designs now edge towards odd and weird, ‘drawing on the past for inspiration’ rather than being clean gorgeous designs that came from Pininfarina.
When was the last time you saw a luxury brand fashion show and thought to yourself, “Wow, that outfit is timeless…” or “That design will hold up over the years…”.
You won’t. Luxury brands are flash-in-the-pan nonsense at 0.1% prices. Ferrari is making cars that fit this model and moving onto the next while chasing that 5% CAGR…
Last Ferrari I GAF about was the Daytona.
Ferrari’s “exclusiveness bordering on the unobtainable” aura only emphasized by the model in the lead photo wearing what looks to be a hair shirt.
I am disappointed Matt missed the “pictured above” opportunity.
“Ferrari is a luxury brand not a car brand.” Duh.
I think moving from battling a giant Ford as a tiny David in the 60’s (and winning against a nasty Goliath) to becoming a fashion brand is depressing. Now if Blenciaga (not a typo) started making low volume sports cars I would applaud that. Rimac moving into fashion shows? Not so much.
Cameron’s Dads’ was the last I cared about a Ferrari. just don’t care. I like Jay Lenos take on the brand.
Same, and that one was fake.
If I had to choose one, it would be this one built from scrap Ferrari parts.
https://www.youtube.com/watch?v=ttl-kF8Rbuo
Honestly, the F80 is the last Ferrari to get my attention since the F50. I’m not saying it’s the best car they’ve ever made, but the design spoke to me like nothing else they’ve made in 30 years. But I want a 330 P4.
The F40, aka when I was young enough to care about unobtainable supercars.
The last time I cared about Ferrari at all would have been before I realized that not only are they a company exclusively for the .01% (which, to be fair, all supercar makers are), they like it that way and go out of their way to keep out the merely rich, as opposed to the obscenely, insultingly, filthy rich.
If I ever somehow acquire Ferrari money, I will take great joy in walking over to the Lamborghini dealer and spending it there instead.
Ferrari = country club rich
Lamborghini = vulgar rich
For the sake of grammarical symmetry:
Ben
Ferrari = country club rich
Lamborghini = night club rich
Oh, no you don’t. I miss the peace and quiet of having folks in charge who had nothing to do with reality television.
Besides, Fluffy wants to be president. She’s perfect. Never talks. Never posts. Definitely never tweets. Also, very cuddly. I eagerly await our new Puffalump overlords.
As for the flush…
GOSHDARNIT, WHY AREN’T MUH BOIZ FASTER?! AND WHY DOES THE F1 TEAM KEEP STEPPING ON ITS WIENER????? CAN WE PLEASE AVOID THE WIENER STEPPING FOR LEWIS AND SHARL’S SAKE??????!?!?!?!?!?!!
I support Puffalump’s campaign and will canvas my neighborhood if you’d like.
It’s an easy sell. Fluffy Bunny is pro-hugs.
If we want to celebrate Ace Frehley we should listen to Shock Me instead:
https://www.youtube.com/watch?v=uR0T5jxkMJs
For me it was the 458 Italia, because it was fun to drive in Assetto Corsa.
I’m surprised no one else has said it, but the last Ferrari that I cared about was the 512BB. The 308 was so pedestrian in that era that even TV producers could afford to buy them for Thomas Magnum, but the 512BB was expensive and V-12 and mostly unattainable in the US. I was probably about 16 when the 512BB came out, at which time I realized that I would never have the means to own one, and then anything from Ferrari became irrelevant to me.
Maybe the 575M, but I was waning already.
I think the 612 Scaglietti is the last Ferrari which really appealed to me.
Tho the beige metallic FF I saw a gentleman driving on the Champs-Élysées was intriguing – I was not enthralled w/ the shooting brake profile or it’s Cheshire Cat grin.
But Maserati and Bentley make nice front-engined 2+2 GTs anyway.
The last Ferraris I ever cared about would have to be any of the lightweight(< 2,500 lbs), sporty, sexy, curvaceous, aerodynamically-slippery Ferraris from the 1950s/1960s. Say, the 250GTO, the 312 P, the 500 Mondial, Dino 206S, you get the idea.
Once they adopted the wedge style in the late 1960s/early 1970s, I’ve hated them ever since. That’s also around the time that mass crept greatly upward as did road footprint and feature bloat.
If Ferrari wants to built a competitive EV, it should be a sexy, lightweight streamliner that harkens back to its most beautiful designs from the 1950s and 1960s. This will keep battery mass down for a desired range. There should be no excuses why it can’t be under 3,000 lbs with at least 800+ electric horsepower, as a highly-engaging and high-performance driving machine. Perhaps they’re afraid it will be too good and cannibalize the sales from bloated ICE models and/or destroy the track times of their flagship ICE models?
The last Ferrari I cared about was probably the enzo I think.
The last “Ferrari” I cared about wasn’t a “Ferrari”, it was a Dino. I almost convinced myself I could buy one. That was a long, long time ago.
The last Ferrari I cared about was the 296 GTB. The Piccolo-12 is a very interesting engine, and I find the GTB’s styling very attractive, but it’s just a bit too much hyper and not enough super for my taste.
The newest Ferrari I ever coveted was the F12, as a teenager watching Top Gear.
The newest Ferrari I can desire currently is a 599, though only 30 were made in a desirable configuration.
I’d take a Fiat 500 Abarth over anything newer. That’s been the most exciting driver’s car made in Italy since 2012.
I’m still caring. I’d love a Dodici Cilindri. I’d also love a 296 GTB. Tampa Bay Ferrari is nearby and I get the pleasure of seeing these regularly, there and on the road.
Lottery win would be a 550 Maranello and a 330 GTC to start.
Hmm that feels familiar like *insert AI company here* and a bit like *Any company with a huge market cap and a P/E ratio more than 5x the industry norm*
Remember when Ferrari was a racing team that sold cars to fund their operations? Enzo must be rolling over in his grave.
He also built cars that people wanted, and (a few) could afford.
Ferrari the man really didn’t give a happy damn about his road cars, apparently, and certainly didn’t try to jack up production to high levels.
They weren’t technological marvels, either, but they had screaming V12s, beautiful coachwork, and were fast enough to keep the customers happy.
It’s not like Enzo was even a huge fan of his street cars. He spent most of his life driving Peugeots and would really only drive the big GT Ferraris occasionally. Is it really that sacrilegious for a brand that used to make their money selling cars the founder apparently didn’t care for to transition to making now money selling other branded items that same guy probably still wouldn’t have used or cared for either? If I had to guess, both are probably necessary evils (i.e. big fat paychecks) to fund whatever the hell the company wants.
You have never worked with or for NASA, and it shows. I have. NASA is like, the OG deep state. Not in the sense that Trump complains about, but in the sense that NASA is infested with deeply entrenched interests who give absolutely zero fucks about what policy direction elected leaders (of any party, this is a many-decades long struggle) are attempting to implement and just go off and do their own thing. Now, you might say this is a good thing, and that makes NASA resilient to ever-shifting political whims, and if that was actually how it worked, I would agree with you.
That is not, however, how NASA works. NASA is divided into a number of centers (Glenn, JPL, Ames, Goddard, Armstrong, etc) that all work on distinct projects that have to ultimately pull from a single source of funding. The office politics involved in fighting over that funding is savage, in ways that would make even the Pentagon blush. Like “threatening to blackmail congress critters” levels of nasty. Any attempt at accountability or reform is strangled in it’s crib, and has been for longer than either of us has been alive.
NASA is full of wonderful, amazing, bright, creative engineers and scientists who work on some of the most inspiring projects humanity has ever produced. They are administered by some of the worst people in government, who employ many of the dirtiest tricks in a bureaucrats arsenal, and as a result staggering amounts of potential is wasted. So yes, NASA has a serious deep state problem that demands major reforms and has for many years across many admins, you can check your knee-jerk partisan reactions at the door.
TBQ: None of them, they’ve never really appealed to me. Especially not now where you basically have to jerk off a company director just for the incredible honor of spending ludicrous amounts of money for one of their lesser models in the hopes of eventually being deemed worthy of purchasing one of the desirable ones. Though I do find it hilarious the absolutely servile reactions they provoke from rich jackasses with more money than brains, so that’s cool at least.
I thought the NASA deep state was the people trying to keep the aliens at Area 52 a secret. (Everyone knows about the ones at Area 51 already).