The market value of Italian supercar maker Ferrari soared to 30 billion

dollars above those of all three major U.S.

automakers, General Motors, Ford and Fiat Chrysler, which was once

Ferrari's parent company compared with those three giants.

Ferrari is a tiny carmaker.

It has long been known for limiting production and makes just about 10000

units per year. Compare that with General Motors, which sold nearly eight

million cars, trucks and SUV cars in twenty nineteen.

While Ferrari is a small company.

It is a huge name.

One of the most famous and admired in the automotive world.

In late May, a 2003 Ferrari Enzo fetched two point six million dollars on

an online auction, making it the most valuable car sold in a dedicated

online only. Collector car auction to date.

We live in a world that's only more and more noisy all the time.

I like to say there are more and more things going on there.

More and more items competing for your attention.

And in a world like that, if you've got a brand that can stand out, a

brand that is universally recognized and can kind of step through and rise

above that noise, you've got a very valuable brand.

And Ferrari in the automotive world would be a perfect example of one of

those brands. Perhaps aside from competitor Lamborghini, Ferrari is the

name that has given Italy its reputation for producing some of the

fastest, sleekest and most eye-catching cars on the planet.

That reputation is so strong.

Ferrari bets it can carry its world class name far beyond automotive

production and sell other goods to the legions of admirers unable to

afford a six or seven figure sports car.

This gamble, however, is by no means a safe one.

Stamping the Ferrari name on fashion, merchandise and even theme parks

risks diluting the brand, especially if the famous pony emblem ends up on

some less than premium products.

The company has acknowledged this.

Ferrari has also stumbled in Formula One, the global racing class where

elite carmakers battle each other for worldwide recognition.

Ferrari did not respond to a request in time for the story over the long

term. The car market, really the idea of transportation itself, stands to

undergo tremendous changes that could even affect demand for exotic sports

cars. As we move into a world where we're getting increasingly electrified

and potentially shifting away from vehicle ownership towards shared

mobility. Is there still a place for a brand like Ferrari in the twenty

40s and the twenty 50s?

Ferrari takes its name from founder Enzo Ferrari, an Italian racecar driver

who had been racing Alfa Romeo cars since 1924.

In 1929, Ferrari founded his own racing team, Scuderia Ferrari, which

exists to this day based in Modena, Italy.

Scuderi, a Ferrari, was at first a team centred on racing Alfa Romeos.

But about a decade later, Enzo set up a manufacturer called out to

Orville, construed Cioni and moved his headquarters from Modena to the

city of Maranello, which would become Ferrari's legendary home.

Thereafter, Ferrari was a car company that wanted to race, and Enzo Ferrari

realized he had to sell a few cars to regular consumers so he could fund

his racing program. That was literally the mantra and the vibe that

started Ferrari.

That was what the owner wanted to achieve.

Ferrari commissioned the engineer Dwar Keno Colombo, to build him a totally

new car in 1945.

Ferrari's first racing car was the one twenty five s made in nineteen

forty seven. It came with a 12 cylinder engine, something frequently seen

on Ferrari's. Later, a street vehicle called the 166 Integra came.

A year later, Ferrari started competing in Formula One, the elite global

racing series in 1950 and won its first world title two years later.

Racing has always been at the heart of the Ferrari brand Scuderia.

Ferrari is the oldest Formula One team and has also participated in famous

races such as the endurance races at Le Monde, France and Daytona,

Florida, continuously.

It's the only brand that has been continuously part of Formula One racing

from 1950 onwards when a world championship was established.

And they've also been involved in a lot of other motor sports.

Unlike other brands, they've always tried to keep it relatively pure heel

sports and grand touring cars.

Being a small manufacturer of highly specialized cars is never an easy path

to travel. Many such automakers have either formed partnerships with

larger companies or been acquired entirely.

Ferrari was no different.

The Italian automaker Fiat took a 50 percent stake in the company in 1969

and increased its stake to 90 percent in 1988.

Enzo Ferrari son Pietro owned the other 10 percent.

And in 2016, Fiat, which had since become Fiat Chrysler, spun Ferrari out

into a separate, publicly traded company, trading under the ticker symbol

race. Ferrari is obviously best known for its cars.

But the company has expanded the reach of the Ferrari brand beyond these

small, rarefied world of racing fans and lovers of supercars.

The late Sergio Marchione, the larger than life CEO of Fiat Chrysler, who

also served as Ferrari's chairman and CEO until his death in 2018, had

said in 2014 that he thought Ferrari had a future that went far beyond

driving. I actually think cars are almost incidental to Ferrari, Marchione

said prior to the company's initial public offering.

It sounds sacrilegious, but it is truly a luxury brand up to its IPO.

Marchione maintained Ferrari was worth at least 10 billion euros, around

11 billion dollars, according to May 2020 exchange rates.

Some analysts thought that number sounded a bit high, with at least one

valuing the company at roughly half that.

But if market capitalization is any indicator, the company is worth about

three times that just a few years later.

Its revenues have not tripled in that time.

Rather, the company and investors have been betting that brand recognition

is an underexploited asset.

At Ferrari, the Ferrari name and the famous yellow and black prancing horse

logo are recognized the world over brand finance, a firm that measures the

impact of various brands, considers Ferrari to be the most powerful brand

in the world. Its fame either rivals or exceeds that of not only other

global luxury symbols such as Rolex and Air May, but also the brand power

of massive information technology and entertainment names such as Disney

and Google and even purveyors of seemingly ubiquitous products such as

Coca-Cola. This is especially striking when one considers Ferrari sells

about 10000 cars per year.

When Coca-Cola says it hands out one point nine billion servings of one of

its drinks every day.

They've been quite cautious about what they're doing, but the kind of

primary. Primary thing that they've been really focused on is making sure

that their models are really strong and they maintain their reputation

for just for excellence in motor cars while not devaluing or

reducing the strength of that brand.

So Ferrari is looking for new ways to leverage that brand power.

The company said it plans for branded goods to contribute 10 percent of

earnings before interest and tax within the next decade.

This includes merchandise such as clothing, coffee mugs and watches.

The company operates its own stores and sells goods online through the

years. Ferrari has stamped its logo on an array of products, including

some very offbeat ones like Acer, laptop computers and mahjong sets.

There is also a Ferrari world theme park in Abu Dhabi, complete with

roller coasters. But there is definitely an opportunity to make a lot of

money from their brand. I mean, if if it's closely connected to their

brand and their experience, like in the case of the theme park, then

that's probably good, because you can you can maintain the connection and

the maintain sort of how the brand is perceived and seen to customers.

And you have quite a lot of control over that.

Of course, there are risks to this.

The company acknowledged in filings that its attempts to reach more

customers through merchandising could lead to some missteps.

Branding is a tricky business.

Part of what gives Ferrari its brand identity is exclusivity.

The ten thousand one hundred thirty one cars it sold in twenty nineteen

came after the company decided to lift its once strict production limit of

7000 cars per year.

Waiting lists for Ferrari cars can be long.

Buyers can wait four to five years for delivery of most customized

Ferraris. The company is also known for being very picky about who it will

even sell some of its limited edition vehicles to.

Late racing legend and devoted Ferrari collector Preston Henn, who passed

away in 2017.

Had sued Ferrari, alleging that the company refused to sell him a Ferrari.

Appeared to Hend had gone to great lengths to get the car.

Even Mei-Ling million dollar check to Sergio Marchione.

The check was returned.

Hend slapped Ferrari with a defamation suit, which he later dropped.

Then he bought an accurate NSX, a supercar from Honda's premium brand,

which he said was better than a Ferrari.

Anyway, the company has at times seemed even aggressive in controlling

what its cars are associated with.

In twenty nineteen, German fashion designer Philip Plein reportedly

received a letter from lawyers representing the automaker complaining

about pictures on his Instagram account.

The lawyers considered persay distasteful, including pictures of shoes on

the car and other photos.

The letter said, tarnished the brand's image.

The letter demanded Plein remove the pictures within 48 hours.

The pictures and the image of the letter, which Flynn also posted, were

later removed. It remains to be seen whether the company will be able to

police the use of Ferrari baseball caps and key chains.

But these efforts can fit Ferrari's Lux brand image in twenty nineteen.

It formed a partnership with high end Italian clothier Giorgio Armani.

For example. The company has cut back on its number of licensing

partnerships and reduced the number of licensed products.

When you start merchandising into lots of different product categories

about which you don't really know the details about how you don't know how

to maintain quality, it starts to get more difficult.

Which is why I think they they have reduced the number of agreements that

they've they've got in terms of licensing by 50 percent and they've

reduced the number of categories by 30 percent.

Apart from preserving its exclusive brand image, the automaker takes

seriously the need to prove its engineering prowess and capability on the

racetrack. Scuderia Ferrari has a remarkably successful overall record in

Formula One. But Ferrari noted in its 20 19 annual report that the team

had struggled that year.

Sponsorship brings in about 14 percent of Ferrari's net revenue, but its

reputation as a winner on the track is difficult to put a price on speed,

as at the very heart of Ferrari's identity.

One of its most famous vehicles is referred to as the super fast.

Racing is also very important for Ferrari research and development.

Many of the innovations that begin life on the track eventually make their

way into Ferrari's street vehicles.

And unlike a lot of other brands that have had that, you know, that race on

Sunday, sell on Monday kind of philosophy, you know, with Ferrari, there's

actually been a lot of technology that has filtered down from the race

cars into the production cars, you know, when they first went from manual

transmissions to semi automatic transmissions.

That was technology that they took directly from their Formula One race

cars. Ferrari has said it intends to take steps to win on the track again,

and despite its branding and merchandising efforts, it remains focused on

building cars. Ferrari unveiled a record five models in 2019.

Among these. The company introduced its first production plug in hybrid.

You know, the Ferrari history is still what's most fascinating to me and

the history that that that brand stands for and the things that

accomplished. And, you know, you can't live in the past forever.

So Ferrari, of course, has to look forward to can't just always look back.

Electrification is a trend.

Many in the automotive industry are at least ambivalent about an often

divided among themselves over on the one hand.

Many see it as an inevitable and welcome development that reduces

pollution while delivering in many ways comparable or even superior

performance. But part of owning a supercar, say some, is the experience of

driving one. And the distinctive engine note produced by high end engines

is part of that experience.

Some also argue that cars stand to lose some of their distinctive

performance characteristics.

There are tremendous differences in performance among various types of

engines. But some argue electric motors are vulnerable to commodification.

Well, I mean, one of their most distinctive things is that the kind of

ruler of the engine, the engine is what's driving that brand.