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What does Ferrari know that Chevy (and others for that matter) doesn’t?

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During a recent conversation with a friend who is in the process of trying to buy a 2022 Corvette, he told me a story that I have heard before.  The dealer:

  • “Promised” him a car sooner than anyone else would;
  • Took a non-refundable deposit;
  • Has not yet delivered;
  • Now wants more money, i.e. is raising the price; and
  • Will not provide a firm delivery date for the car.

To be fair, at the beginning of this misadventure my friend should have been suspicious when all of the local dealers told him that the cars were in short supply and it might be quite a while before he would be able to take delivery.

That said, I began to wonder how a brand (not Chevrolet) that has products that are in continual short supply and whose customers usually get what they want when they want it can not only thrive but keep those customers both happy and loyal.  So, what is Ferrari’s secret:

  • They build a fabulous product;
  • They have developed and maintained one of the world’s most powerful brands;
  • The always build fewer of their products than there is demand for them; and
  • They reward their loyal customers.

Fabulous Product

Any product that is going to be able to differentiate itself in the long term needs multiple hard to replicate attributes and Ferrari has 3:

  • First Class Engineering—Enzo Ferrari sold cars to the “public” to pay for his racing habit.  The early road-going cars were detuned versions of the cars that he raced competitively.  They were built to the exacting standards necessary to compete in a punishing racing environment.  They were examples of the best in industrial engineering.  As a result, they present as the industrial version of works of art to be appreciated for the quality of construction and the resulting durability and performance.
  • Exquisite Design—Most people agree Ferrari cars, old and new look the way they do because they perform better that way.  At the same time, they are visually appealing and Ferrari has done a great job of making the most of necessary aerodynamic design requirements by hiring designers who leveraged the necessary into a visual art form
  • Top Performance—the Brits coined a phrase: Fit for Purpose” and the Ferrari delivers.  It is a first-rate performance car and performs brilliantly as a statement about the owner.

While there are some automotive products that can hit on one or two of these attributes, very few can claim the trifecta.

Powerful Brand

Ferrari is arguably the most powerful automotive brand (maybe even across product classes) in the world.  It is a luxury brand and it is a performance brand.  It is also an aspirational brand.   The brand is not only built on the products that Ferrari builds today, but also on Ferrari’s heritage.  The cars that Ferrari built is the 1950s and 1960s are even more valuable than those that they build today.  A Ferrari is an appreciating asset largely because of the strength of the brand.  And the brand is strong not only because of the products Ferrari produces today, but also because Ferrari invests in the heritage.  Ferrari will service/restore your 1963 250GT and certify that it is both real (not a copy) and correctly assembled with the right parts.  This is important when the average retail price is nearly $1.6MM.  This commitment reinforces a history of greatness that continues today.  I would note that this particular model is nowhere near the most expensive Ferrari you could buy.

Ferrari’s heritage only partially based on its roadgoing cars.  The real anchor is racing.  Today Ferrari races to support its roadgoing brand, but as I noted earlier, in the beginning, Enzo Ferrari sold cars to pay for his racing team.  And many people buy a Ferrari to own a piece of that history and the potential, given the capabilities of the street cars, of driving like one of the many talented Ferrari F1 drivers.  And, if not that, to be able to drive down just about any road and have everyone turn to look at your ride.

Demand Exceeds Supply

Enzo Ferrari once famously said that he would always deliver one car less than the market demands.  His point, that the goal was to leave people wanting.  This is technically part of the brand discussion.  Exclusivity is an important part of the Ferrari brand.  And customers wait (sometimes many) months to be able to get their car.  This means that even if you have the money, the product might be out of your reach.  And the fact that you can not get it is part of the allure—a characteristic of the brand.

Customer Rewards

Ferrari rewards its clients several ways:

  • The product delights their clients whether they are buying it as a grand tourer, a track car or a prestige vehicle.  Ferrari is very good at exceeding its owner expectations;
  • The company takes care of you.  It does cost, and it really costs, but the service is exceptional; and
  • This is where we started this post.  Ferrari has a very well-defined way to buy one of their cars and it does not include paying premiums over list.  If you want a new Ferrari, you go into the dealership and sign a sales contract and agree to pay a lot of money.  Then you wait.  When the car is an exceptionally high demand vehicle when/if you get it does not depend on paying more money.  It depends on how many Ferraris you have already bought. 

The idea is that if you are a really good customer, you get first dibs. 

The bottom line here is that if you make a great product, you can charge a lot of money and still keep your customers happy (and loyal— Ferrari buyers are incredibly loyal) if you follow the rules and treat them right.

And finally, I believe that every company that I have dealt with during the course of my career would have been better off had they studied Ferrari’s brand/product philosophy and incorporated elements of it into their own.

BTW—I don’t own a Ferrari and don’t intend to😊

Copyright 2022 Howard Niden

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Engineers aren’t being Engineers– and that isn’t a good thing!

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I was reading an article in Car and Driver (November 2016) about the new Acura NSX— I know, I am a bit behind in my reading.  The author (Eric Tingwell) spends quite a bit of time talking about the NSX’s gas-electric hybrid drivetrain and makes an assertion that all cars in the high-performance category will within 10 years be hybrid-electrics.  This really distressed me (way more than it should have), but it also got me thinking:

  • Hybrid Electrics are complicated beasts and it pains me to think that we need this much complexity to achieve both performance and fuel economy, ouch;
  • It seems to me that most car companies are moving toward hybrid-electrics points to one or more of several things:
    • Car companies are following the path of least resistance. They are doing the Hula Hoop thing.  Hybrid Electrics are a fad and they just can’t manage to help themselves—they are producing the flavor of the day;
    • Internal combustion engines have a serious PR problem and it isn’t worth fighting uphill against the headwinds that face that technology;
    • Hybrid-electric technology is sexier than materials science structural engineering. In other words, the engineering management is predisposed to want to work on hybrid-electric projects and so are their engineers.  So instead of putting the effort into lightening the vehicle, they choose to focus on propulsion systems;
    • It is the only solution that will provide the solution that we are looking for— the required performance and efficiency.

     But, it is likely to be some combination of these, quadruple ouch!

I later read an article in the November Road and Track (Sam Smith & Jack Baruth) where they compare two hybrid supercars, the Ferrari LaFerrari and the Porsche 918.  They retail for $1.4M and $845K respectively.  And, here is what they said: “The problem for me is that I think both cars would be better without the hybrid components.”  So, the arguably most sophisticated hybrid electrics on the road would be better without the “electrics”.  Further, they continue: “They’re both based on this kind of bogus idea that there’s going to be room in the future for 900-hp, two-ton, two-seat cars because… what? Because they have electric motors?”  The idea being that they won’t have the durable appeal that truly “well engineered”, in the truest sense of the phrase (see my previous post—A Short Checklist that Pays Big Dividends and Ensures Success), have.

But, what really bothers me most, is that (in my mind) engineers aren’t supposed to care about sexy.   They should focus on the best engineering solution.  And, if I was looking to improve both the efficiency and performance of a car I would concentrate on weight.  While the problem of reducing weight is not easy, the resulting machine is likely simpler, probably more efficient and incorporate better tested technology (the internal combustion engine has been around better than 100 years) than the hybrid-electric solution.

And, if you think about it, radical weight reduction could have a profound impact on both the performance and efficiency of an automobile.  A 2006 paper from the folks at Argonne National Laboratory for the Society of Automotive Engineers called Fuel Economy Sensitivity to Vehicle Mass for Advanced Vehicle Powertrains does the math.  And, there are others, do a web-search to find them.

Finally, some might make the argument that you can’t perfect the breed without investing in it.  To that I answer that I don’t think anyone thinks that hybrid-electrics are anything but a suboptimal interim solution and that batteries have a long way to go (and are themselves an interim solution) before they can truly supplant the internal combustion engine even in terms of overall end-to-end efficiency if you would put serious engineering effort behind further advances in the technology.

I don’t have any issues with technology and moving forward to ones that are clearly superior.  But, most of the experts seem to feel that hybrid-electric is at best a transitional technology (so, this move toward hybrid-electrics can’t be meant to improve the breed) and until batteries (or fuel cells) get a heck of lot better than they are today, it is unlikely that one can make the case that electric or hybrid-electric cars really make sense.  So, why are there so many hybrid-electrics and an increasing number of battery-electrics?

I ask this question in all seriousness to better understand the issue, maybe I’m wrong.  Help me understand how that is!

Copyright 2017 Howard Niden

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