Ferrari Is The Flagship Of The Fiat-Chrysler Automotive Group

Posted by: : Paul EbelingPosted on: September 15, 2014 Ferrari Is The Flagship Of The Fiat-Chrysler Automotive Group

Ferrari Is The Flagship Of The Fiat-Chrysler Automotive Group

Fiat spa (MI:F, PINK: FIATY) owns 90% of Ferrari, and Fiat’s Chairman and CEO, Sergio Marchionne, has wanted the supercar company to expand its offerings and lead Fiat and, soon, Fiat Chrysler, to a larger role in the super luxury car market ala Volkswagen AG (DE:VOW3, PINK:VLKAY) with its Lamborghini brand.

Ferrari sold 7,318 cars in Y2012 and 6,922 cars in Y 2013, revenues rose 5% in Y 2013 despite lower sales.

The company attributes  the boost to its customization program, which added something to every car that Ferrari sold in Y 2013.

Adding custom treatment to an already expensive car led it former Chairman Luca Cordero di Montezemolo, 67 anni,  to say, “We want to maintain a high level of exclusivity…” It was that very success that put him at odds with Mr. Marchionne.

The Fiat chief sees the market for super luxury cars widening with Maserati and Alfa Romeo (which are not in the class with Ferrari), and others now producing cars that are expensive, but not as expensive as Ferrari.

The company’s Y 2014 California is priced in just under $200,000 for the basic model, while the 458 Italia carries a base price of more than $250,000. The Ferrari FF lists for $295,000 and the F12Berlinetta coupe has a price of nearly $320,000, before any tailor-made detailing.

(See the article at http://www.livetradingnews.com/ferraris-tailor-made-program-for-new-car-buyers-68572.htm#.VBeKrIIqgxE)

By contrast, the Maserati Ghibli sedan has a base price in the US of $66,900 and the Gran Turismo Coupe carries a base price of about $153,000.

Mr. Sergio Marchionne, 62 anni, is happy to see the premium market expand at the lower end and he wants to make sure that Ferrari is positioned to take advantage of that expansion.

Low-end expansion is the strategy that both BMW and Mercedes-Benz have adopted with cars priced at around $40,000. This is a take off on the old General Motors (NYSE:GM) marketing strategy: buy a Chevy when you are young and striving, then move up to a Cadillac as you get older and richer, it worked for a long time, it does not work now for GM.

Mr. Marchionne plans to increase Ferrari’s production to 10,000 units. Where as Mr. Montezemolo wanted to maintain production at around 7,000 to underscore Ferrari’s exclusivity.

His point is valid.

According to British brand research firm Brand Finance, Ferrari has been the world’s most powerful brand for the 2nd year running.

Widening the base of the premium market pushes those already there into what might be termed a super luxury-premium mindset. Mr. Marchionne is bett ing that the buyers currently at the top of the premium market will be willing to pay even more to maintain exclusivity.

This is a riskier than Mr. Montezemolo’s plan, but the rewards if it works can be to be greater. If it does not work, then look for Mr. Marchionne to ‘spin off” Ferrari in an IPO and use the money to help fuel his expansion plans for FCA Group, and Mr. Montezemolo could come back again to lead the company as he has for 23 yrs, after all Enzo Ferrari was his director and he is highly thougth of by Piero Ferrari, Enzo’s son.

Ferrari spends a lot of money on its Formula One racing team, and the success of its racers is the basis of the company’s romance, and brand power. Once Mr. Marchionne takes the helm at Ferrari, expect more changes there too.

HeffX-LTN Analysis for FIATY: Overall Short Intermediate Long
Neutral (0.09) Neutral (-0.05) Neutral (0.21) Neutral (0.10)

Stay tuned…

Paul Ebeling

HeffX-LTN

 

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Paul Ebeling

Pattern Recognition Analyst, equities, commodities, forex
Paul Ebeling is best known for his work as writer and publisher of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly-regarded, weekly financial market letter, where he enjoys an international audience among opinion makers, business leaders, and respected organizations. Something of a pioneer in online stock market and commodities discussion and analysis, Ebeling has been online since 1994. He has studied and worked in the global financial and stock markets since 1984.
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