Ferrari's mega IPO (initial public offering) seven years ago cemented the idea that manufacturers can break free from the market shackles that limit their performance when it comes to multiples, the highest of which is usually attributed to ventures in the digital e-commerce, financial, technology or life-sciences sectors. Its market cap today of around $39 billion is mind-boggling, considering it sells just around 11,000 units (2021). Compare it to Ford, whose market cap is $60 billion, which sold 1.9 million vehicles at the same time.
Ferrari, which was created by founder Enzo Ferrari as a racing company, has always been built with two primary objectives – winning and speed. Its reputation for both has been bolstered, thanks to its historical and legendary success in the F-1 races, with over 200 victories and machines that are noted for not just their tantalising sex appeal and looks but also their finely-tuned performance and engineering. The best Ferraris of all time have even gone to break auction records. The 'greats' over the last few decades only are the 288GTO, F40, F50, Enzo, and the La Ferrari. There are many older 'Super great Ferraris ' like the 250 GTO of 1965, which sold for close to $70 million. There's even a club. The Ferrari Owners Club is an actual club consisting of only Ferrari owners (brand new or used), who get exclusive access to extravagant events worldwide as Ferrari unveils its new models.
No surprise then that the hype around their performance on Wall Street had investors and fans equally plugged in. The stock crashed by almost 40% before recovering to soar by over 400% to its present market cap.
So the inevitable question on everyone's mind, for years, was what was Ferrari going to do for its next phase of growth? Judging by other super-car makers in its league, the answer was obvious. Make an SUV.
Lamborghini has its Urus, Aston Martin it's DBX707, Maserati the Levante, and Porsche, which is the one who started the SUV trend –– the Cayenne. Not only did the SUV expand the sportscar maker's audience and fan following – by making the product less of an enthusiast's personal hobby and more of a luxury pursuit the entire family would enjoy – but also made for great business. Margins on an SUV can easily go up by 40 or 50% compared to a sedan. Remember Range Rover and Jaguar?
At least one reason aside from the patronage of the late Queen Elizabeth II for Range Rover's ongoing viability was its high customizable content and therefore profit margins.
So after a long wait, Ferrari has finally announced that it would be launching an SUV – the Purosangue. The four-door four-seater comes with a naturally-aspirated V12 engine and is embedded with the Prancing Horse’s DNA. The name Purosangue is Italian for ‘thoroughbred".
The Purosangue has a driving position close to the floor to provide greater connection to the car’s dynamic capabilities, and Ferrari says it doesn't want to call it an SUV. Being a listed company, the sports car maker has also used the SUV to emphasise its focus on ESG. The fabric roof-lining is recycled polyester, the carpet is made from polyamide recycled from fishing nets retrieved from the oceans and the newly formulated Alcantara suede, also derived from recycled polyester.
Interestingly, Ferrari, which has cleverly followed the model of issuing limited editions that are quickly replaced, is likely to do the same with this SUV. That's because it is a non-EV SUV and likely to be the last of that kind making it highly collectable as well as most likely already sold out. While that means smaller volumes, it also suggests Ferrari is well on the way to rolling out more versions that will be electric.
Ferrari takes its exclusivity in building mystique for its cars to the extent that even if a potential customer has enough money to buy a Ferrari, the company often refuses to sell to them if they feel that their profile does not match up to the company’s image. That means, buying a new Ferrari is a challenging process and almost all the time requires a long wait. This is not unusual, in fact even in India most Ferraris – even if newly launched cars – have a waitlist of anything as long as 18 months.
While only history determines great cars, the Purosangue will do two things: set the stage for a duel with the likes of Porsche and Lamborghini and most likely open up a brand new channel of revenue, enthusiasm and consumers for SUVs. The race is on.
