Articles

Michael Sheehan's Ferraris-online.com Article

Crunching Ferrari’s Global Numbers

Late–model sales almost match new car sales, which is why Ferrari works hard on its warranty–supported used–car program

As appeared in:

Sports Car Market—April 2008 issue

Sheehan Speaks

by Michael Sheehan

2006 599 GTB Fiorano, a small piece of Ferrari’s worldwide cake
2006 599 GTB Fiorano, a small piece of Ferrari’s worldwide cake

Decades ago, when negotiating with bankers for our first seven-figure credit line, I was asked, “What is the annual global Ferrari market, in both dollars and cars?” While I’ve long since forgotten the figures for that period, it was an interesting exercise to calculate then, as it is today.

We start by breaking Ferrari sales into two categories, first the primary or “new car” market, controlled by Ferrari SpA through their allocations to dealers worldwide. For 2007, that number was about 6,400 new cars worldwide. We’ll use an average of the list prices, excluding the $100,000 premium attached to the 599s, and not get into the vagaries of currency exchange rates or the insane import taxes attached to some cars, such as the 105% import and luxury taxes on a new Ferrari sold into Brazil or the 85% into China. That averages out the 430/612/599 cars at close to $300,000 each for gross annual new Ferrari sales of about $1,920,000,000 per year.

Having guesstimated $1.92 billion for 2007, an Internet search found that Ferrari SpA reported sales of €1.289 billion ($1.87 billion) for 2005 and €1.447 ($2.1 billion) for 2006, reflecting the weak dollar and adding in the sale of current competition cars and what Ferrari calls its “brand development activities” (accessories and memorabilia). A more accurate number, when figuring in the hot-selling and high-priced 599 and an ever-weaker dollar, will almost certainly be close to $2.5 billion

Used car market much harder to calculate

The waters muddy as we attempt to calculate the annual dollar and transaction count in the secondary or “used car” markets, consisting of everything from the 166 series up to the “used” 599 market

Because the rich can and do trade late-model Ferraris on a whim, there are hundreds of 360s, F430s, 612s, and 599s for sale at any time in every major market. We start with authorized Ferrari dealers, which normally sell about two used Ferraris for every new one.

In the U.K. that figure jumps closer to three used for every one new, while in China there is virtually no secondary market, as the nouveau-riche Chinese don’t want to “lose face” driving somebody else’s old car.

While the figures obviously vary widely from dealer to dealer and from country to country, that’s about 12,000 or so of the more “modern” Ferraris sold annually through the dealer network. We will further define “modern” as the “di Montezemolo era” 355/360/430/456/612/599 market. Again, we have to put an arbitrary value on these cars, averaging out the $400,000 price for a “used” 599 versus $75,000 for a driver 355, guesstimating at $200,000 per car for a total world dollar volume in the $2.4 billion-range.

Machiavellian marketing

With gross sales from the late-model used Ferrari market through authorized dealers in the same range as new car sales, it’s obvious why Ferrari has worked hard to implement its warranty-supported used-car program for these late-model Ferraris. It’s a major cash flow bonus for new Ferrari dealers.

Indeed, as far back as 1992, when Gian Luigi Buitoni became the president of Ferrari North America, the corporate mandate has been that Ferrari, through its dealers worldwide, should control anything and everything Ferrari, eliminating the independent dealers and service and restoration shops, to be replaced by well-run dealer facilities. Reality is that there is an inverse new-to-used relationship for those lucky (and “connected”) dealers who get 50-plus new Ferraris per year, as their new car sales more than cover their overhead, making the used-car business a hobby.

Regardless of Ferrari’s “master plan,” it is estimated that about 3,000 or so of the 355/360/430/456/550/575/612/599 cars are sold or brokered through independents and owners, rather than dealers. Let’s assume these average $150,000 or so, for a sales total in the $450 million-range.

Post-Fiat 1974–95 cars change hands less often

We next calculate the post-Fiat, pre-di Montezemolo Ferraris, starting with the 3,500 or so 208 and 308 GT4s built and then adding in every Ferrari from the 365 BB and 365 GT4 2+2, starting with a s/n range of about 17000 up to the first 355 with a s/n in the 98000 range. To complicate the formula, prior to s/n 75000, almost all production Ferraris had only the odd serial numbers, but after s/n 75000 Ferrari used every digit, so figure about 32,500 Ferraris up to s/n 75000 and another 23,000 up to s/n 98000. That’s more or less 55,000 Ferraris built from 1974-ish to 1995.

In speaking with other dealers worldwide, it’s generally given that these Ferraris trade hands less often than the 360/430/612/599 models, so we will assume that 10% of these cars are for sale at any given time—with 15% changing hands annually—through independent dealers, brokers, and owner-sellers. Factor a driver 308 GT4 at $25,000 up to an ultra-clean 512 M at $175,000. That’s an average of about $60,000 per car, spread over about 8,000 Ferraris, for an average annual market turnover of somewhere near $480 million.

Global Ferrai Market

Many in long-term hands and trade quietly

As for the 250 series and other vintage street Ferraris, up to and including the Daytonas and Dinos, figure a total of about 8,500 V12 cars and 3,700 Dinos were built, for a total of about 12,000 cars. Many of these cars are in long-term hands and usually only trade quietly through a network of well-connected brokers. Assume 5% to 10% are for sale at any given time and that 10%, or 1,200 cars, change hands annually.

Price? You’ve got a bunch of $90,000 330 2+2s up to a few Daytona Spyder sales around $1,250,000. The number of cars sold drops dramatically as the price goes up, because very few are worth two commas. But the average price you need to pay for any classic Ferrari would have to be $300,000–$400,000. Average that to $350,000 over 1,200 cars and you get $420 million annually.

Last but not least are the supercars, the dream cars that rarely change hands but usually make headlines when they do. Factor in 200 or so coachbuilt 410s and the like, with another 800 or so competition and dual-purpose GTs, including cars like the 166 Barchetta, 250 SWB, 512 M, up to the 333 SP. Figure that 15% might have changed hands in the super-hot market of 2007, and we have 150 cars trading hands at some number averaged out to nearly $2.5 million each, for a total of about $375 million.

Global total is an eye-opener

In summary, we have 6,400 new Ferraris at about $2.5 billion, another 15,000 or so late-model used Ferraris for $2.85 billion, add in about 8,000 post-Fiat 308s, 400s and BBs, up to the last TRs, for some number close to $480 million, another 1,200 production 250-365 GTB/4s at $420 million, and last but not least, 150 or so dream cars at a final $375 million.

Add it all up, and you get an estimate of 30,000 Ferraris changing hands annually, out of a total production, to date, of 130,000 Ferraris built, or, as expected, between 20% and 25% of the total production. And that equates to gross revenues of about $6.625 billion.

Impressive numbers, and proof that the path Enzo cut decades ago—race on Sunday, sell worldwide on Monday—has worked so well for all these years and still fuels the phenomenal growth outlined above.