Why Is Ferrari So Expensive? - Vol.298
When looking at a price tag of a Ferrari a lot of people might start scratching their heads about why Ferraris are so expensive. There are four main reasons that we'll discuss here.
1. Limited Production
Building a car from scratch is very expensive. It starts with design and sketches on paper. Then detailed blueprints are made, usually on the computer. The next step is creation of a physical prototype, typically from metal or fiberglass. Then there are research and development expenses that go into creating a powertrain, engine and other parts of a car, driving tests on the road, crash and safety tests, emissions and government certification. There are factory and workforce expenses. All this can easily cost hundreds of millions of dollars.
With mass-market cars, historic lengths of manufacturing and economies of scale come into play. For example, Toyota Corolla has been selling on the market since 1966. Oftentimes changes from one generation of mass-market cars to the next are very small, which also means inexpensive. This doesn't happen when Ferrari goes from, say, F40 to F50.
Speaking of volume numbers, over 40 million Corollas have been sold worldwide since the car was introduced to the market.
Compare this number to the numbers of sold Ferraris:
Ferrari F40
Production started: 1987
Production ended: 1992
Total production: 1,315
Ferrari 348tb
Production started: 1989
Production ended: 1993
Total production: 2,895
Ferrari 360 Spider
Production started: 1999
Production ended: 2004
Total production: 7,500
As you can see, 7500 units of Ferrari 360 Spider don't get anywhere close to 40 million of Corollas, while the development costs can be much higher. With limited edition Ferraris the numbers are even smaller! For example, the Ferrari F50 was introduced in 1995 to celebrate the brand's 50thanniversary and the number of cars produced was only 349.
2. Higher Cost of Materials and Manual Labor
Almost every component in a Ferrari, from its suspension system to the gear knob, is significantly different from a similar component in a mass-market car. Exotic interior leather, low-profile tires and carbon fiber parts cost a lot of money.
Production of mass-market cars is mostly automated and looks like a conveyor belt. A Ferrari factory looks more like a set of production stations. This requires more skilled, high-paid workers. There are a lot of videos on youtube with tours of Ferrari assembly line that you can watch for free. You will be surprised by the amount of work that is being done by hand.
3. Marketing/branding costs.
In addition to producing cars for regular roads, Ferrari owns a racing team called Scuderia Ferrari. The team is most known for its participation in Formula 1 Championship, but it has also participated in other races. Having a racing team for Ferrari is marketing, branding, PR and R&D under the same roof. Obviously, running a racing team is also very expensive.
4. High demand.
With the number of millionaires and billionaires growing steadily from year to year, the demand for Ferraris is very strong all over the world. For example, China is the second biggest Ferrari's market after the US.
To capitalize on this trend and to remain an exclusive manufacturer, in 2012 Ferrari decided to cap production at 7000 cars. Despite of this fact, financial statements have revealed that 2012 was the best year in Ferrari's history up to that time. In 2013, however, Ferrari's revenues were 5% up from 2012. In addition to this, every Ferrari sold in 2013 had some kind of personalization done to it, which is usually very expensive and proves that there are a lot of people willing to pay whatever it takes to get a Ferrari of their dreams. With Ferrari's decision to increase production slightly sales have only gone up and are bound to continue to increase.