As The economy is crumbling when the next Great Depression is comingIt seems that consumer spending in the luxury car sector is rising. Ferrari just announced better-than-expected earnings earlier this week (Monday, May 4), Leading to the Maranello car maker's stock price rose by nearly 7%.
The luxury automaker closed its plant in March because the coronavirus ravaged the brand's residence in Italy, but during the one-month vacation, total sales of Ferrari supercars increased by 5% to 2,738. Better-than-expected revenue – US $ 1.02 billion, better than the expected US $ 852 million, led to Ferrari ’s stock price soaring, the Italian luxury car manufacturer ’s market value exceeded the mass market consumer car manufacturers Ford and General Motors.
Colin Couchman, Executive Director of Global Automotive Demand Forecasting at IHS Markit, said: "The unexpected and sudden nature of the impact of the pandemic is hitting the automotive industry seriously, and the prospect of a meaningful global recovery is full of unprecedented uncertainty."
At the time of the announcement, people's expectations fell back, because the business data company IHS Markit predicted that the Chinese factory will resume production, because the new COVID-19 security work requirements make it impossible to restore previous operating capabilities, especially in consumer demand In a weak market. From January to March, Chinese automakers experienced the weakest quarter because of shutdowns that closed factories, distribute stores and kept consumers at home.
According to data from the China Association of Automobile Manufacturers, demand started to pick up in March, an improvement from the 79% decline in February, but sales are still down 43% from the same period last year.. Although almost all dealers in mainland China have resumed work and there are signs of encouraging passenger traffic in the showroom, consumer confidence remains fragile, but quarterly sales fell to 3.7 million units year-on-year due to concerns about the impact of global spread on the used car market . It may further disrupt the recovery.
IHS Markit's latest analysis predicts that after covid-19, global light vehicle sales will drop by 22% to 70.3 million units in 2020. Similarly, regional predictions have also been greatly affected. Facilities in major regions are still closed, while recovery in other regions is ongoing, and people are feeling this impact.
The pandemic led to a 22% decline in global sales of light vehicles, and luxury cars should also decline
In North America, the United States is expected to lead the global auto market to decline, and its domestic car sales will fall by 26.6%, which is the lowest level since the industry recovered from the 2008 Great Depression. In an interview with CBC News, Dennis DesRosiers of DesRosiers Automotive Consultants said that car sales in Canada fell by nearly 75% in April, the second consecutive month of double-digit declines after a 48% decline in March due to the epidemic. Popular in all parts of Canada. DesRosiers added that the automotive industry has experienced economic storms such as the energy crisis of the 1970s and the financial crisis of 2008, but there is a fundamental difference between these events and the coronavirus crisis.
Consumers are still driving. If you do not drive, your vehicle is sitting in the driveway, so you do not need to replace it. It will be very difficult to attract people into the showroom before we drive again. "-Automotive consultant Dennis DesRosiers
In fact, DesRosiers believes that the coronavirus pandemic will hit the sales of luxury cars, and the sales of luxury cars have maintained rapid growth over the past decade. I want to call it "the person who pretends to be eager to buy a luxury car but can't afford it."
However, that The data shows that the evaluation of luxury cars is different. Tesla reports that sales in China in March 2020 were 10,160Is the highest monthly sales volume in the history of the world's largest auto market. Like Ferrari and Bugatti, luxury sports cars also recovered unexpectedly from a round of rebound. High-profile revenge spending initiated by boring high-net-worth individuals.
In an interview with the South China Morning Post, Cui Dongshu, secretary general of the China Passenger Car Association, said that Tesla sold 30% of electric cars in mainland China, and the data shows that the Elon Musk brand was sold in January. 2,620, 3,900 were sold in February. Tesla plans to produce 150,000 Model 3 sedans from its Shanghai plant.
Why Ferrari attracts investor confidence: amazing profit margins
Motor1.com studied a report from Fiat Group World in 2019, which found that Ferrari should earn an operating profit margin of 23.2% for each of 10,131 cars that year, and the profit for each Italian supercar is 94,474 And "Ferrari has made considerable profits by adopting new technologies, adapting to market changes and marketing its vehicles." Fiat Group World is an unofficial website that tracks trends in Fiat Chrysler and global automobiles.
In an industry with a profit margin of about 5-10%, the report also conducted a comparative study of Ferrari ’s profit relative to other car manufacturers: BMW will need to sell 30 cars to equal the revenue of one Ferrari sold, while Mercedes will have to sell 67 new cars. In the mass market, you need to sell 908 Ford and 928 Nissan to match.
Ferrari ’s market value is hovering around US $ 30 billion, but in the context of Monday ’s trading closure, Chief Executive Louis Camilleri told investors that car orders in the US and Australia were "several cancelled" but "no red light flashes in any region" and the company lowered its 2020 earnings forecast, While warning its Formula One racing business and other departments of continued weakness.
The IHS Markit Economic and National Risk Team released an update of the global economic forecast, indicating that it will slide into a global recession in 2020, with real GDP growth falling by about 3%, and recent demand / supply declines, and then slowly recovering.
Cox Automotive senior analyst Michelle Krebs told CNN: "The three things that most determine car sales are credit, employment and consumer confidence. Everyone is against car sales. At present, the demand for luxury goods consumption is still optimistic, and it is full of confidence among the wealthy people who are not affected by credit supply and employment.