Ferrari Plans To Increase Production By 30 Percent
Ferrari’s planned initial public offering later this month will result in a number of things for the high-end car manufacturer, one of which would be the company’s desire to ramp up production from about 7,000 units to around 9,000 units annually by 2019, representing a 30 percent increase.
The storied automaker is expected to begin trading next week at the New York Stock Exchange where it plans to sell 17,175,000 shares to the public as part of its planned spin-off from Fiat Chrysler. Share are expected to be priced at around $48 to $52 each. Financial underwriters like UBS and Bank of America will also have the option to sell an addition 1,717,150 shares. If the company times the IPO market correctly – something that’s not a certainty in the current stock market climate – the company walk away from the shares sale with a value of as much as $9.8 billion.
On the surface, the decision appears to be sound if the company is serious about its plans to increase production in response to what it says is a “growing demand in emerging markets.” It’s what any other company would do if it were in the same situation.
But Ferrari’s a different case altogether because it’s not just any other company. A big part of its reputation as the most desirable supercar manufacturer in the world is its exclusivity. Not everyone can own a Ferrari and even those who do have the financial capacity to buy its models often have to wait as much as a year to get the car. Making these models more accessible to the market could be interpreted as the company losing that halo on its head that endeared it to Ferrari buyers and collectors in the first place.
For its part, Ferrari doesn’t seem to be concerned with the perceived backlash that will come with the IPO and its intention to ramp up production by 30 percent. The company believes that it will still retain its “exclusive” status; it just wants to address the growing demand for its cars, something this public offering can do. It even said as much in its filing, stating that it plans to maintain its reputation of exclusivity and scarcity by “deliberately monitoring and maintaining [its] production volumes and delivery wait times to promote this reputation."
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Why it matters
I’m not a Ferrari owner so I can’t speak for the feelings of those who are worried that this IPO will do more harm than good for the company. I do understand they’re feelings, strictly from a collector’s point of view. Increasing production of an item, be it a Ferrari or a Funko Pop, means that more people can buy this item. By having more people owning Ferraris, those who have been in the Prancing Horse game for a while now will look at their Ferraris and think that they’re not as exclusive as they once were.
This is especially true for standard production Ferraris like the California, 488, F12berlinetta, and FF. Imagine living in a street wherein you’re the only one with a Ferrari FF. Then Ferrari increases production of these cars and a few months later, you’re neighbor drives home with his own FF and just like that, you’re not the only one with a Ferrari in the street. It’s a simplistic example, but it I think it’s a good illustration of what current Ferrari owners feel about this increased production. Tight production numbers mean that these Ferraris typically maintain their value and appeal.
Ferrari says that it’s not going to be the case and I’m inclined to believe it, but only for those special edition models like the LaFerrari and the FXX. These are the crown jewel models of Ferrari and even with increased production, I don’t think it’s going to have any effect on the collector status of these cars. In the case of the LaFerrari, the company imposed stringent rules and conditions for owning, including the condition of having owned a specific number of Ferraris to be eligible to place an order on the $1.2 million supercar.
But as far as the normal production models are concerned, there really is a legitimate argument that their pre-owned values will soften with more models being made available to the public. It’s a delicate balancing act that Ferrari needs to address to keep its current clientele happy.
Read more about the Ferrari 488 Spider here.