Ferraris and Aston Martins Are Still Selling Well—When They Can Be Built
Third-quarter results from the two luxury-car makers show what a difference manufacturing efficiency and supply-chain management can make
The superrich are throwing more money than ever at fancy cars. That doesn’t always make them super-profitable to manufacture.
Ferrari reported “remarkable order intake” alongside third-quarter earnings on Wednesday. The luxury-car maker doesn’t disclose reservations, yet orders for its Purosangue model—its long-discussed answer to sport-utility vehicles, launched in September with a starting price of €390,000 in Italy, equivalent to $385,000—are running “way above our most promising expectations,” said Chief Executive Officer Benedetto Vigna on a call with analysts.
The company nudged up full-year guidance. It now expects revenues of €5 billion, which would be about 17% higher than last year and almost a third above the prepandemic total in 2019. Adjusted operating profits should come in above €1.18 billion, giving a margin of about 24%—well ahead of the average for listed car makers. Ferrari shares nonetheless fell, underlining just how high expectations are set after years of consistent delivery.
It isn’t easy to get a luxury-car brand right. Just look at Aston Martin Lagonda, AML -15.25% which also reported earnings Wednesday. It has desirable products, albeit not in Ferrari’s league: In the third quarter, the average price paid for an Aston Martin jumped to a record £189,000, or about $217,000, excluding special editions, and orders for the company’s core sports-car range extend well into next year. But the company has for years been let down by weak profitability amid persistent operational problems.
The latest are slow logistics and shortages of certain interior parts, which stopped it from delivering all the vehicles it hoped. Hurricane Ian delayed shipments from Britain to the all-important U.S. market, for example. The problems seem temporary, and the company has new products coming next year that are built on a more flexible production line designed to be more profitable. But AML has disappointed investors so continuously since its 2018 initial public offering that few are prepared to give it the benefit of the doubt.
AML shares dived 15% Wednesday as the company downgraded sales and profit guidance. The stock is now down 82% this year, not helped by a discounted rights issue in September. Even after that equity raise, the company’s balance sheet appears debt-heavy. The fundamental problem is insufficient cash generation.
Ferrari is the finely tuned cash machine AML needs to become. AML isn’t shy about the link: It hired former Ferrari CEO Amedeo Felisa to be its new boss in June, as well as a former Ferrari engineer as chief technical officer. Ferrari will probably make about twice the number of cars AML does this year, yet it has almost 17 times the enterprise value.
That comparison highlights the opportunity for long-term investors if AML can finally be turned around. Very few car brands can command prices as high as Aston Martin, and most of them are doing well. Volkswagen last week reported Ferrari-like profitability at its most expensive brands, Lamborghini and Bentley.
There are also plenty of deep-pocketed backers prepared to bail AML out. The latest capital increase brought the Saudi sovereign-wealth fund and Chinese car maker Geely on board, though Canadian billionaire Lawrence Stroll remains the largest shareholder, as well as executive chairman.
The risk for smaller investors is that they are asked to cough up yet more cash before AML finally turns the long-awaited corner. Next year’s product launches will be all-important. The company will have to hope rich people then are still feeling insulated from the economy’s wider problems.