George Orwell
2007-05-08 14:08:55 UTC
Wall Street Journal - May 8, 2007
..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.
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
http://snipurl.com/Ferrari_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.
"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."
..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.
.waiting lists...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.
..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
http://snipurl.com/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."
..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.
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
http://snipurl.com/Ferrari_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.
"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."
..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.
.waiting lists...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.
..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
http://snipurl.com/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."