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    WSJ article about Ferrari supply and demand

    How to Slow Down a Ferrari: Buy It
    More Sales in China Mean A Longer Wait in the U.S. For a New Trophy Car
    By GABRIEL KAHN
    May 8, 2007

    MARANELLO, ITALY -- How long should the world's super-rich have to wait before they can buy a Ferrari? The answer has as much to do with how luxury-goods companies create an aura of exclusivity as it does with the global economy's shifting winds minting more millionaires in places like China, Russia and the Middle East.

    For years, Ferrari SpA, a division of Italy's Fiat SpA, had a standard 12-month waiting list for a new car. That was long enough to make prospective Ferrari owners drool with anticipation, but not too long to drive them toward competitors such as Porsche AG or Volkswagen AG's Lamborghini, where waiting times are usually shorter.
    [Photo]
    Ferraris at the Shanghai auto show

    The year-long waiting period also allowed Ferrari to achieve a rare feat in the automobile industry: the resale value of its cars, pushed up by loyal collectors and dealers, rarely depreciated. So confident was Ferrari Chairman Luca Cordero di Montezemolo of this system that in 1999 he boasted the company would never make more than 5,000 cars a year. At the time it was making slightly more than 4,000, and most of its customers were in three markets: North America, Italy and Germany.

    Since then, however, the math and the market logic underlying Ferrari's approach have been thrown out the window. The escalating desire to own a Ferrari among the newly rich of Asia, the Middle East and Russia has yanked the company's clubby ways out of whack.

    Ferrari made 5,700 cars last year, and the number this year will crest above 6,000. Even so, average waiting times in Hong Kong, the United States, Australia and England have soared to around 24 months or more. In Italy and Germany, the wait hovers around 18 months. (Ferraris currently retail from $190,000 for a F430 to $280,000 for a 599 GTB Fiorano.)

    "We realized a few years ago that we needed to rethink this," says Andrea Bozzoli, Ferrari's commercial and marketing director. "We started to consider 18 months ideal, but now we can't even keep up with that." What changed, Ferrari executives say, was a surge in demand in emerging markets. The company now sells more than 100 cars annually in the United Arab Emirates and more than 150 in China -- two markets where sales were virtually nonexistent only a decade ago. Ferrari will ship 60 cars to Russia this year, only three years after opening its first dealership there.

    Michael Mastrangelo, a Ferrari dealer in Spring Valley, N.Y., since the 1970s, says that in the New York area in recent years, the wait has averaged three years for a new Ferrari. Last year, when Wall Street bankers were earning record piles of cash, Mr. Mastrangelo couldn't reap the benefits. Since Ferrari's headquarters imposes strict limits on how many cars it ships to each dealer, Mr. Mastrangelo's suburban New York City dealership couldn't sate the demand -- especially as repeat customers always come first.
    [Global Gears]

    "It's very hard to come into a dealership right now and put in a new order if you are not already a customer," he says. "When I get a young person, what I say is, 'Let's start with a used car' . . . It's kind of like getting into a club."

    Satisfying the desires of these wealthy new consumers goes beyond a hot set of wheels. High-end fashion and jewelry brands, such as Gucci Group NV and watchmaker Patek Philippe SA, are also retooling product lines and rethinking marketing. While in mature markets, the target consumers are women, men are heavier-spenders in many emerging markets, so fashion brands have adjusted their message.

    Ferrari has always been skittish about making too many cars, afraid that even a modest boost in volume could damage its refined image and aspirational appeal. Even this year's increase of 10% above last year's 5,700 cars will strain its one factory. All of its cars are customized, and its specialized work force spends years in training before joining the assembly line. Porsche, by contrast, makes around 100,000 cars a year. For a customized car, customers must wait between three and six months, according to Ferrari.

    Now, coping with the sudden demand from new quarters is proving awkward. "If you go to some Arab countries, where customers want a car, or more than one, immediately, it can get sticky," says Ferrari's Mr. Bozzoli. Ferrari, he says, tries to make special accommodations for members of royal families and tries to get used cars to tide over important customers until they can get a new one. Still, there is a "feeling of mistrust about the waiting list," says Mostyn Heard, the president of the Ferrari owners club of the United Arab Emirates

    "People think that you might get moved up or down on the list depending on whether you are a V-VIP [Very-Very Important Person] or merely a successful manager," says Mr. Heard, who manages properties for the ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, and expects to wait three years before his new 599 model will be delivered.

    Ferrari admits that there was at least one such case of waiting-list tampering but that this no longer occurs. There is another problem with multiyear waiting lists, though: They can foster a gray market in which a person who takes delivery of a new Ferrari immediately flips it to an even hungrier buyer for sometimes double the price. That weakens Ferrari's ability to control its pricing and resale value, and keep track of its coveted customers.

    It's a similar problem that has plagued high-end fashion labels for years: Designs that hit stores in Paris or Milan first would be snapped up by dealers who resold them in boutiques in Asia. Big luxury-goods conglomerates from Gucci to LVMH Moët Hennessy Louis Vuitton SA have since tightened their supply chains to ensure new lines hit their global store network at the same time and, when possible, at the same price. Of the roughly 20 Ferrari F430s circulating in the UAE, only about three were sold through the local dealership, estimates Mr. Heard. The rest were bought off mostly Europeans for what is often a substantial premium.

    Ferrari is trying to stem the problem by policing waiting lists from dealers world-wide. Getting on the list usually requires fronting a portion of the car's sales price and providing proof of sufficient funds to cover the rest. Moreover, Ferrari tries to weed out duplicate names or people it thinks might be posing as a front for another buyer, says Amedeo Felisa, Ferrari's general manager.

    Meanwhile, Ferrari is trying to keep up with the demands of its new consumers. At the Shanghai auto show in April, Ferrari served cocktails to a select group of prospective buyers atop a podium surrounded by a high glass wall while gawkers snapped photographs.

    Among the potential clients was Mr. Liu, a 35-year-old financial entrepreneur who declined to provide his full name. Mr. Liu, who already owns a BMW 750 and a Land Rover, said he was willing to pay 4 million yuan ($520,000) for a Ferrari 612 Scaglietti, but he didn't want to be put on any waiting list.

    When salespeople tried to steer him toward a lower-priced car that would be more readily available, Mr. Liu insisted on waiting for the 612 , snapping: "I want it as soon as possible."

    Re: WSJ article about Ferrari supply and demand

    Bottom line?

    Ferraris are way too cheap, expect a massive price increase and/or more volume.

    Re: WSJ article about Ferrari supply and demand

    I sure am glad I finally just got my 430 spider and I love it. Worth the wait!!!

    Re: WSJ article about Ferrari supply and demand

    My dealer told me months ago that Ferrari was monitoring all sales to be sure there is credibility to the list of waiting customers. Additionally, they monitor resales to try to prevent flipping. If a delaer is caught "gaming" the system he could lose several allocations.

    Re: WSJ article about Ferrari supply and demand

    Maybe they should control the waiting lists even more, but also "legalise" the gray market that goes through dealers, by charging them a presentage under the threat of penalty.

    Re: WSJ article about Ferrari supply and demand

    Quote:
    nberry said:
    Additionally, they monitor resales to try to prevent flipping. If a delaer is caught "gaming" the system he could lose several allocations.



    BS

    They all do it. How do you explain all the "new" spider at $300K then?

    Re: WSJ article about Ferrari supply and demand

    Makes you wonder about the job of sales person in a ferrari dealership?

    There is nothing to sell, at least new stuff, must be like sitting on a college admissions board.

    Re: WSJ article about Ferrari supply and demand

    Quote:
    SciFrog said:
    Quote:
    nberry said:
    Additionally, they monitor resales to try to prevent flipping. If a delaer is caught "gaming" the system he could lose several allocations.



    BS

    They all do it. How do you explain all the "new" spider at $300K then?



    Very explainable but not in this forum.

    Re: WSJ article about Ferrari supply and demand

    Quote:
    SciFrog said:
    Quote:
    nberry said:
    Additionally, they monitor resales to try to prevent flipping. If a delaer is caught "gaming" the system he could lose several allocations.



    BS

    They all do it. How do you explain all the "new" spider at $300K then?



    The dealers are charging what they want now. They take a look at you and determine what they can get, based on existing customer, new guy, money bags guy, sucker, whatever. It's OK for them to make the spread but not OK for anyone else these days.

    Re: WSJ article about Ferrari supply and demand

    LOVE to live in Europe, Ferrari's HOME base !
    We get ALL the cars we want at "normal" waiting times and MSRP prices

    Re: WSJ article about Ferrari supply and demand

    Patriek,
    But can you resell in a couple years and at least break even. Here in the US, if you can buy a 430 spider at MSRP (me) you can resell in a couple of years when the replacement comes out and break even or make a couple of bucks.
    Al


    Quote:
    Patriek said:
    LOVE to live in Europe, Ferrari's HOME base !
    We get ALL the cars we want at "normal" waiting times and MSRP prices


    Re: WSJ article about Ferrari supply and demand

    Just where do the Chinese owners exercise their cars?

    Re: WSJ article about Ferrari supply and demand

    Quote:
    Patriek said:
    LOVE to live in Europe, Ferrari's HOME base !
    We get ALL the cars we want at "normal" waiting times and MSRP prices



    Only know how much (or how little) a car actually costs to own/lease when one trades it in....MSRP and mkt prices can be misleading...

    Time is money....599 has already been out for 12 mos in EU and 6 mos in US....waiting 6-12 more mos to get 599 @MSRP may not be a better "value" vs getting new 599 today/few mths ago@MSRP/mkt price.....

    Tech half-lives for cars are increasingly short .....after all, who wants to wait 12-18 mos post-launch to get an iPhone/latest Blkberry/latest laptop, etc????

    Re: WSJ article about Ferrari supply and demand

    thks for the article

    Re: WSJ article about Ferrari supply and demand

    Ferrari and Fiat are managed by useless and incompetent people.

    While a few are happy because tehy finally got their hands on one, most buyers will be angry and unsatisfied customers. It's a very bad way to do business. In addition, Dealers are making the money, not ferrari itself.

    They do think their products are so exceptionnal that customers will always go back, no matter what they're put trhough by dealers. But things have changed. A decade ago, lambo was no where, aston martin too, porsche had no GT3Rs or carrera GT, mercedes and bmw were not making 600bhp cars. Yes Ferrari is still on top, but their offer of a $300k F430 is facing more competition from unexpected manufacturers. When you can get a carrera GT at 350, it make you think twice before paying 300 for a F430.

    Re: WSJ article about Ferrari supply and demand

    Completly not true the FiatGroup is managed by people who are almost genius , Marcchione for example.
    In the past yes the management was so incompetent that calling them incompetent is being nice to them...

    Re: WSJ article about Ferrari supply and demand

    They have done a good job with Fiat.
    They have done a great job creating the 430 and 599 (performance/handling wise).
    They have the best F1 team.

    But why have they not raised US prices? That's incompetence.

    Re: WSJ article about Ferrari supply and demand

    Quote:
    SciFrog said:
    They have done a good job with Fiat.
    They have done a great job creating the 430 and 599 (performance/handling wise).
    They have the best F1 team.

    But why have they not raised US prices? That's incompetence.



    They have raise prices rather significantly. The base price of the 360 Spider and Coupe were $166,000 and $140,000 when they were first introduced. Now the base is around $210,000 and $178,000. Then add all the options you must order regardless if you want them, their models have increase well over 33%.

    Re: WSJ article about Ferrari supply and demand

    True, but nowhere near real market prices still.

    Re: WSJ article about Ferrari supply and demand

    Quote:
    nberry said:
    Quote:
    SciFrog said:
    They have done a good job with Fiat.
    They have done a great job creating the 430 and 599 (performance/handling wise).
    They have the best F1 team.

    But why have they not raised US prices? That's incompetence.



    They have raise prices rather significantly. The base price of the 360 Spider and Coupe were $166,000 and $140,000 when they were first introduced. Now the base is around $210,000 and $178,000. Then add all the options you must order regardless if you want them, their models have increase well over 33%.


    But 33% barely covers the rate of depreciation of the US$ against the Euro, so Ferrari is not making anything from that price increase.

    Re: WSJ article about Ferrari supply and demand

    F430 successor will probably get another 33% hike.

    Re: WSJ article about Ferrari supply and demand

    Quote:
    SciFrog said:
    True, but nowhere near real market prices still.



    I agree. I would rather have the market sort itself out instead of playing itself into the Grey. If you walk into a US dealership and they have allocations at 300k, that makes more sense to me than walking in, having to buy a used/undesirable Maser, then getting on the list, trading up with equity to get within a respectable time frame, then finally waiting for your spot, only to realize that the owners son ate your allocation

    Re: WSJ article about Ferrari supply and demand

    They should trade the allocations on an exchange like stocks.

     
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