Ferrari profits boosted by bespoke car

sales

Sales of its first high-riding car and customers paying extra for bespoke paint jobs helped
Ferrari to generate record profits last year, as it forecast earnings would rise in 2024.
The Italian luxury house posted a 34 per cent increase in net profits to €1.26bn on Thursday
in preliminary results, with car sales up 3.3 per cent to 13,663. Revenues climbed 17 per
cent to almost €6bn after the company began deliveries of the Purosangue, its first SUV-
style model last year.
More than €460mn of Ferrari’s increased profits came from selling higher-priced cars, better
sales in the Americas and China, as well as a rise in personalised features such as coloured
brake callipers or bespoke paint jobs.
The group will also make less money from Formula 1 racing because of its poor finishing
position last year, although it expected that to be offset by “strong personalisations” from
customers paying for bespoke features. Personalised features, where customers pay
sometimes tens of thousands of pounds on top of the price of their car, have been a big
driver of profits for the business in the past year, leading it to upgrade forecasts every three
months in the year to November.
About 44 per cent of cars sold last year featured hybrid engines, which Ferrari uses to
increase the power and performance of its cars, rather than primarily to reduce emissions.
The company has promised to release its first all-electric car next year, but will continue to
produce engine-only models, as well as hybrids, for the foreseeable future. Ferrari has given
little detail about the electric model, leading industry figures to speculate it could be a high.
Vigna told a Financial Times conference last year that the model would be a “true Ferrari”
and would produce its own noise, rather than using artificial sounds to replicate the engine
tones beloved by its owners. Shares, which have risen almost 50 per cent in the past year,
climbed 5 per cent.
Full article:https://www.ft.com/content/f554f53b-7841-45f6-aab5-b4e12e963933
This abstract has been adapted from the Financial Times, written on February 1st 2024.

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Pearson Edexcel GCSE Business
This case study relates to the following topic areas of the course specification:
1.2.3 Market segmentation
1.3.2 Business revenues, costs and profits
1.4.3 The marketing mix
2.1.4 Ethics, the environment and business
2.2.1 Product
2.2.2 Price
2.2. Using the marketing mix to make business decisions
2.3.1 Business operations
2.3.3 Managing quality

Recommended research activities:

Research the different models available from Ferrari. What bespoke choices can
customers get?

Exam style questions:

1. Outline one drawback to Ferrari of using job production to produce its cars.
(2)

2, Outline one benefit to Ferrari of using job production to produce its cars. (2)

3. Analyse the impact on Ferrari of targeting high income earners with their
products. (6)

Additional question using the full article:

Evaluate the extent to which Ferrari will benefit from producing an all-electric car by
2025. (12)

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for free. Sign up or check if you are registered at www.ft.com/schoolsarefree
Model responses to exam style questions:

1. Outline one drawback to Ferrari of using job production to produce its cars. (2)
One drawback of Ferrari using job production to produce its cars is that they
can be individually personalised (knowledge and understanding). This means
Ferrari can meet each customer's individual needs and charge the customer a
premium price for the final car. (linked strand of development & applied to
Ferrari being a luxury car manufacturer).
2. Outline one benefit to Ferrari of using job production to produce its cars. (2)
One benefit of Ferrari using job production to produce its cars is that making
each car individually will be more time consuming (knowledge and
understanding). This means that as each car will be bespoke to the customers
requirements, they will take longer to make compared to making lots of cars of
the same colour in job production (linked strand of development & applied to
Ferrari being a luxury car manufacturer).
3. Analyse the impact on Ferrari of targeting high income earners with their
products. (6)

Targeting high income earners will benefit Ferrari as they can charge them a higher
price for their cars (knowledge and understanding). This means each Ferrari car can
be sold at a high price so will generate higher revenue for Ferrari (linked strand of
development & applied to Ferrari being a luxury car manufacturer). This leads to
Ferrari being able to build up a brand image of being luxury in the car market (linked
strand of development & applied to Ferrari being a luxury car manufacturer).
Therefore targeting high income earners will help Ferrari’s brand image of being
luxury and then customers will be willing to pay more for their personalised, high
performance cars (linked strand of development & applied to Ferrari being a luxury
car manufacturer).
(Please note, for an analysis question, the paragraph above would be sufficient to
answer the question)
Targeting high income earners will not be good for Ferrari as they will expect a
higher level of customer service (knowledge and understanding). This means Ferrari
will need to hire the best employees and train them to be able to respond to
customer questions well (knowledge and understanding). This will increase the
staffing costs for Ferrari (knowledge and understanding). Therefore targeting high
income earners will mean Ferrari will have to spend more to ensure their staff are
highly skilled to meet the expectations of their customers (knowledge and
understanding).

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for free. Sign up or check if you are registered at www.ft.com/schoolsarefree