Fortune is favouring Ferrari with a winning streak for its signature formula one car racing team, as it prepares for its split from parent company Fiat Chrysler Automobiles (FCAU, Financial) and an inaugural IPO in June this year. The triumphant win by ace driver Sebastian Vettel in the Malaysian grand prix in March 2015 and podium finishes in all other grand prix this season, ushers in a wave of euphoria for this champion motor racing team which has suffered through numerous dismal performances for the last twenty years. With a boost from this fresh wave of brilliant performances and unadulterated positive publicity, the jubilant company under FCA chief Executive Sergio Marchionne gears up to woo investors for a valuation around 10 billion euros, i.e., 7 billion pounds and plans to sell 10% of the firm in the upcoming initial public offering.
The luxury car maker believes that its celebrated racing team is a true reflection of the luxury car makers’ endeavour for definitive performance, pioneering technology, innovative design backed up a rich legacy of commendable deliveries on a global platform and its success augments the brand value of Ferrari.
The rich legacy of the prancing horse
Ferrari S.p.A. is a Maranello based Italian luxury sports car manufacturer and is considered the illuminati of the luxury car industry. Founded in 1929 by racing car maker Enzo Ferrari who said he built engines and then attached wheels to them, the makers of the world’s most expensive car were acquired by Fiat which finally merged into Fiat Chrysler Automobiles, the fifth largest car maker in the world, who announced intentions to sell its 90% stake in the company in 2014.
The engine-dominated formula of their founder proved enduring as Ferrari is the only surviving motor racing team of 1950 tiding over numerous lean seasons and peaking with Michael Schumacher’s superlative performances of record-breaking five successive world championships in the 2000s. With around 7000 annual sales of its luxury cars and a promising list of waiting customers, profit is not the only priority. The straight-forward and pragmatic, Marchionne acknowledges that formula one wins do not translate directly into more sales but victory for the iconic team is essential for the Ferrari brand that is estimated to be worth around $4.7 billion and is a ‘non-negotiable’ target. The popularity of the races which attract an audience of approximately 400 million on television globally has a huge marketing potential and good performances tend to propel sales of Ferrari merchandise and memorabilia all over the world and the same efficient high speed engine, sleek design with proven aerodynamic technology that is used for Formula racing cars is also employed in the road cars that have come to symbolise speed, luxury and wealth over the years.
Brand Ferrari and its financial prospects
Over the years, the ability and performance of its racing team has blended with the fundamental identity of Ferrari and major overhauling in senior management as well as engineering department of the ultra-sophisticated racing cars was done in the last eight months to create a frictionless , state-of-the-art technology driven line-up that focusses solely on revamping its performance.
With little known about actual Ferrari financials, according to analysts the racing team with its prize money and sponsorship deals, accounts for almost 10%-15% of the car maker’s total revenue of 2.76 billion euros. But that doesn’t necessarily translate into profit as almost all of it is reinvested in the team’s maintenance and development
With the recent string of stellar performances and investors eagerly awaiting the disclosure of authorised banks and final stakes for the upcoming IPO, Monaco Grand Prix is yet another opportunity for the Prancing horse to emerge ahead of the rest.
