Operating margins help manufacturers keep the lights on. In markets where many manufacturers are competing, the margins get thinner. But, in ultra-exclusive markets, the reverse is true. For example, Ferrari closed 2019 with some serious cash from each unit the company sold.
According to a report from Fiat Group World,
“With 10,131 cars sold last year, Ferrari continued to dominate the profitability ranking. After setting a record result of sales figures, the Italian carmaker recorded a 23.2% operational margin, with each unit worth more than €86,000. Their quick adoption of new technologies, ability to adapt to changes in the market, and their impressive marketing department, allowed Ferrari to successfully navigate the tough period. Impressively, they achieved these strong results without the contribution of SUVs”
Almost $100,000 per car
You read that right. For each unit sold, Ferrari made an average of €86,000. To be specific, it made €86,369. At today’s exchange rate for the Euro, that translates to $93,455.58 US Dollars… per car!
In recent weeks there has been a lot of comparison talk between Ford and Ferrari because the film Ford vs. Ferrari was recently in theaters. Ford had, at one time, been in discussions to buy Ferrari. The deal fell apart. Ford was forced to maintain the core of its business, where competition is plentiful from other manufacturers. The ultra-exclusive market has been a bit beyond its reach for the most part. So, Ford’s operating margins have remained thin for generations.
How would Ford have to sell?
Just how thin Ford’s margins were for 2019 is highlighted in the report mentioned above. Along with other manufacturers that are also used for comparisons, the report provides an infographic, included below, stating Ford would need to sell 908 units in order to equal the profit made from one sale of a Ferrari.
It is common knowledge that manufacturers make more per unit sale on an SUV or pickup truck. So, Ford’s profit margin is conceivably higher on each of those. Nonetheless, the information we extracted from the Fiat Group World report was based on average per-unit sales. So, Ford’s SUV and pickup sales were already accounted for in the calculated average. This, of course, is in sharp contrast to Ferrari, which has no SUVs at this point in time.
Interestingly, Ferrari’s future looks to be including an SUV in the near future, joining Lamborghini, and Maserati who each already offer an SUV. There is no doubt that the SUV model will sell well if it does come to fruition. Given the company history, many Ferrari models sell out faster than Ferrari can make them. Still, 2019 was the first year Ferrari made more than 10,000 units in a year. An SUV Ferrari would be an attractive proposition to people who want the ultra-exclusivity on the brand. So, it is probable that an SUV will boost the number of units sold per year by Ferrari upward quickly.
Ford, for comparison sake, makes hundreds of thousands of vehicles. SUVs, pickups, and crossovers are the mainstay of the brand right now. It’s operating margin for each vehicle may be razor-thin when compared to Ferrari, but Ford deals with the everyday person’s budget. Since the Coronavirus has launched the world into hyper uncertainty, Ford may have a better opportunity to have people part with their money than the tres expensive models from Ferrari.
Comparing apples to oranges, or Fords to Ferraris is futile. Each company caters to a different customer. But in this time of economic uncertainty, both manufacturers will be concerned about their operating profit margins more than ever. Right now, Ferrari has a substantial margin to work from. One that Ford would have to sell 908 units in order to match.