Ben Gilbert and David Rosenthal on Ferrari, Enzo's Racing Obsession, and the Luxury Brand Machine

Ben Gilbert

Today's episode is about selling dreams. We are talking about Ferrari, one of the most paradoxical companies we have ever studied. Ferrari ships very few cars, around 14,000 a year. That is roughly the number of Toyotas sold every ten hours. And Toyota is a silly comparison, so take a company we have covered before, Porsche. Even Porsche ships 22 times the number of cars Ferrari does. And yet, even though almost nobody owns a Ferrari, only about 180,000 people globally, they have among the highest brand recognition on earth. Over a billion people easily know what a Ferrari is.

Ben Gilbert

Which means Ferrari has the highest ratio of people who know its products to people who actually own them of any company in human history, at least among companies that make products nominally available for purchase. Ferrari is the only ultra-luxury brand that has reached mass cultural awareness.

David Rosenthal

Some numbers to put that in perspective. There are ten times more Birkin and Kelly bags made each year at Hermès than there are Ferraris. And there are 70 times more Rolexes made each year than there are Ferraris.

Ben Gilbert

The paradoxes continue. People are dying for their SUVs, and yet Ferrari limits them to just 20% of total volume. Ford makes 160 times the number of cars Ferrari does, yet Ferrari has a higher market capitalization. They are worth more than Ford, Volkswagen, Honda, Stellantis, and Mercedes-Benz. Ferrari makes almost all of its cars by hand, inefficiently, one-off, in a single town, Maranello, Italy, and they have the highest margins in the entire auto industry. And here is my favourite fact: of the very few cars they make, about 80% are earmarked for people who already own a Ferrari. That means there are fewer than 3,000 genuinely new customers buying Ferraris in any given year.

Ben Gilbert

So how on earth did Ferrari build this incredibly valuable business while selling their cars to almost nobody? The answer is bloody. It is half a century of death and speed and love and feeling alive, plus some of the cleverest business-model mechanics we have ever studied.

David Rosenthal

It is beautiful, it is tragic, it is romantic. There is death, sex, betrayal, and very, very fast cars. Let me take us to Italy.

David Rosenthal

We start in 1898 in the medieval Italian town of Modena, with the birth of our hero, Enzo Anselmo Giuseppe Maria Ferrari, known to hundreds of millions simply as Enzo. He is the second of two sons. His mother, Adalgisa, is a beautiful young woman. His father, Alfredo, is twelve years older, runs a successful metalworking shop, and is a fairly well-to-do middle-class entrepreneur about town. Enzo and his father are often at odds, but one thing his dad says sticks with him for life: a company is perfect when the number of partners in it is odd and less than three. In other words, don't take on partners. Always be self-sufficient.

David Rosenthal

Much of this history comes from the definitive biography of Enzo, written by Luca Dal Monte, who worked at Ferrari and Maserati for many years and then dedicated about a decade to researching and writing it. Enzo's parents are always fighting, yelling, arguing. It has a very different effect on each of their two children. The older brother, named Alfredo after his father but nicknamed Dino to tell them apart, becomes the golden child: the peacemaker, the pleaser, the smart and successful one who will take over the family business. Enzo, the younger, takes after the less savoury parts of both parents. He is mischievous, doesn't apply himself at school. Why should he? The family has money, and Dino will make them proud. Enzo dreams of becoming a journalist or an opera singer, mostly so he can hang out with the show girls.

David Rosenthal

But one thing captivates Enzo's spirit: the new modern sporting pursuit of automobile racing. One night, as a teenager, he declares to his best friend, 'I am going to be a racing driver.' That dream comes true, but not the way he expected. World War I breaks out, and two tragedies strike in quick succession. His father contracts pneumonia and dies. Shortly after, Dino, the golden child, enlists in the Italian army, also contracts pneumonia, and dies. Enzo is left alone with a mother he must support, the family business gone, and no discernible skills, because he never applied himself. Then Enzo too is drafted, comes down with pneumonia, and nearly dies, but survives. He would later say, 'I feel alone after a life crowded by so many events, and almost guilty of having survived.'

Ben Gilbert

The title of his memoirs is 'My Terrible Joys.' That tells you everything you need to know about Enzo's life.

David Rosenthal

When he comes home at the end of the war, he has no hope but still has his dream of motor racing. He starts making noise about selling the family house to buy a racing car and win prize money. His mother says no, and instead arranges for him to travel to Turin to interview at Fiat, the biggest Italian car company, essentially the Ford Motor Company of Italy. The family behind it, the Agnellis, are the wealthiest and most important industrialists in the history of Italy. Today they own and control both Stellantis, the merged result of Fiat, Chrysler, and Peugeot, and also Ferrari. We'll get there. Fiat rejects his application, again because he has no discernible skills. But Enzo is persistent, and in 1919 he lands a job at a startup called CMN, where he pledges his future salary to buy one of the company's sports cars, which he then takes racing.

David Rosenthal

Important point: at this time, motor racing was a private, individual sport. Drivers generally bought and raced their own cars, either because they were independently wealthy, the so-called gentleman racers, who ultimately become Enzo's core client base, or because they were hustlers and dreamers like Enzo who glommed onto the car industry and leveraged it into races. It was not organised professional teams. Enzo does well enough to send prize money home and to attract Alfa Romeo, Italy's other large car company, much smaller than Fiat, but one of the few in Europe with its own in-house racing team. They scoop up the young hotshot. His teenage dream is coming true.

David Rosenthal

So Enzo hatches a plan to cash in on his newfound fame. At 22, in 1920, he starts his first company, a coachbuilding business in Modena. Now, what is a coachbuilder? At this point in time, the bodies of cars were built and designed by third-party coachbuilders. The car maker delivered just an engine and a chassis, and the client would go to a coachbuilder to have the body built to their taste, on top of the mechanics.

Ben Gilbert

It reminds me of our Rolex episode, where the movement makers were totally different from the case makers, which were totally different from the jewellery stores that sold them. Not the integrated way we know it today.

David Rosenthal

Exactly. It is a holdover from the horse-drawn carriage days, where the coachbuilders built carriages but didn't supply the horses. Enzo's half-baked plan is that, thanks to his coming fame as an Alfa Romeo driver, customers will come banging on his door. What the connection is between being a good driver and a great coachbuilder, I'm not sure, and neither is the market. Within two years he is bankrupt. And his mettle as a professional driver proves good but not great. He has all the talent and skill, but he lacks the one final thing that separates the champions: he is too afraid to die. He can't push himself and the car right to the edge, to the limit.

David Rosenthal

Part of this is his haunted past. Once he joins Alfa Romeo, two senior drivers take him under their wing and become friends, and Enzo watches them both die during races. He was the first to reach one of them, who literally died in his arms.

Ben Gilbert

That is the sick reality of racing at this point in history. The people who win are the ones absolutely willing to go right up to the line and cross it. In our Formula 1 episode, we talked about how, through the 1970s, there was an average of more than one death a year out of a field of only about twenty drivers. And paradoxically, that is also part of the appeal.

David Rosenthal

So in 1924, Enzo quits racing, casts off the coachbuilding business, and opens an Alfa Romeo dealership in Modena. He is married now, wants a family. His son, naturally named Dino after his father and brother, is born a few years later. He is going down the time-honoured path of retired ex-athlete opening a local car dealership. But toward the end of his racing career, Enzo had gotten involved in the actual management of the team and knew Alfa's managers. Then, the next year, the Alfa board makes the inexplicable decision to drastically cut back its racing. Enzo panics: the racing publicity is his only connection to fame and the reason people would buy cars from his dealership.

David Rosenthal

So he goes to Alfa headquarters in Milan with a proposal. I understand you want to cut the expense of running your own team. What if I take it over? All the races you don't want to run, you bless me, Enzo Ferrari, as your official racing agent. I'll hire the drivers and mechanics, I'll cover the costs. It is a fully outsourced racing team, a loose contract relationship you don't have to carry on your books. And for Enzo, what better marketing could there be than to become the quasi-official second team of Alfa Romeo?

David Rosenthal

And thus the first iteration of the Ferrari business is born: the Scuderia Ferrari, the name he gives his new racing team. Scuderia means 'stables' in Italian, a stable of drivers and cars. The Ferrari racing team to this very day, in Formula 1 and elsewhere, is Scuderia Ferrari. That is the SF you see on the Ferrari shield.

Ben Gilbert

And for a team that would adopt the prancing horse, I love the metaphor: the stable and the horses.

David Rosenthal

Enzo is a natural-born marketer. Now, the Scuderia is intended as a junior partner to Alfa, at least as Alfa intends it. But in the back of his mind Enzo has broader ambitions. Unless you're one of the new mass-assembly consumer car companies like Fiat or Ford, the barrier between being a garage that develops and maintains racing cars and graduating to making your own cars to sell to privateers is pretty thin. His prime example is Maserati, right across town in Modena, the Maserati brothers, who made exactly that jump.

Ben Gilbert

In the video-game world this is modding. You take someone's basic game and soup it up into something special that you customise.

David Rosenthal

So where does the famous prancing horse come from? The first thing it went on was Alfa Romeo cars, so there are these bizarre old photos of an Alfa-badged car with a Scuderia Ferrari prancing horse on the fender. Back when Enzo was a promising young driver, one of his early supporters was a noble Italian count and countess whose son, Francesco Baracca, had been Italy's number one ace fighter pilot in World War I. Baracca won 34 aerial victories before he was killed in combat right before the end of the war. On his airplane he had painted, as his good-luck charm, a black prancing horse.

David Rosenthal

Baracca is a national hero. Everybody in Italy knows him and his symbol. His parents are fans of Enzo, and one night after the war the countess tells Enzo, 'Why don't you paint the black horse on your car? It will bring you luck.' And she gives him a photo of her son in front of his plane, inscribed, directing Enzo to use the symbol. So Enzo takes the prancing horse and places it on a yellow shield, yellow being the city colour of Modena, with the three colours of the Italian flag above. It is genius marketing. The horse links Enzo and the team to a national hero, the shield signals doing battle on the racetrack, and the Italian colours reflect his ambition to make this the Italian national team.

David Rosenthal

In our research I spoke with Luca di Montezemolo, the legendary Ferrari chairman who would ultimately succeed Enzo, a different Luca from the one who wrote the book. There is a popular legend that Enzo was just a racer, that he only wanted to race, didn't care about business or road cars, and that the road cars existed only to fund racing. Montezemolo confirmed that is completely false. Enzo was a natural-born entrepreneur and marketer. He was Italy's Steve Jobs in every aspect. Think about it: Steve Jobs was not an engineer, he was a marketer. The same as Enzo. Enzo couldn't build the cars himself, but both men had a deep appreciation for the technical things that made their visions possible.

Ben Gilbert

Enzo would say of himself that he is not an engineer, not a car designer, no longer a driver, but 'an agitator of men.' That perfectly describes Enzo, and Steve Jobs too.

David Rosenthal

And think about the other symbol he adopts: Ferrari red, Rosso Corsa. Sure, red was the assigned national racing colour of Italy, but Enzo is the one who imbued it with so much more. It is not Alfa's colour, it is Ferrari's. When a ten-year-old draws a race car today, they colour it red, and that is Ferrari red. Red is passion, blood, desire. Look at Italy's other supercar company, Lamborghini. Their colour is every colour but red, because Ferrari co-opted it.

David Rosenthal

In 1933 the golden opportunity arrives. Alfa disbands its official team entirely and designates Scuderia Ferrari as its official racing operation worldwide. Enzo acquires the entire Alfa operation: engineers, mechanics, everything. His dream has come true. And by this point Alfa had been nationalised by the fascist state under Mussolini, so Enzo is now Italy's official national racing team. But there is one problem. Alfa got out of racing for a reason. Hitler is coming to power in Germany, and one of his agenda items is proving German automotive supremacy on the racetrack. The German state backs Mercedes and Auto Union, which becomes Audi, and their cars dominate European Grand Prix racing. Ferrari is sent out to compete, but it is a fool's errand.

David Rosenthal

So in 1938, Alfa and Mussolini, fed up with losing, acquire Scuderia Ferrari and fold it back into Alfa Romeo as an official government entity. This is really just rearranging deck chairs, because the war is coming. In 1939, Enzo gets into a fight with Alfa management and manages to get himself fired. His separation agreement forbids him for four years from building cars to race and from using the Ferrari name in association with a racing team or car builder. He essentially lost the rights to his own name for four years.

David Rosenthal

During the war, Enzo creates a new company to feed the Italian war effort, which he names Auto Avio Costruzioni, sneaking 'auto' in there. It is not called Ferrari, but this same company is better known today as Ferrari S.p.A., the joint-stock company publicly traded on the New York Stock Exchange under the ticker RACE.

Ben Gilbert

Best stock ticker ever.

David Rosenthal

The company makes machine tools in the workshops Enzo built in Modena, and on each tool he has them stamp the prancing horse and 'Scuderia Ferrari Modena,' signalling his intentions after the war. Enzo becomes good at it, and it becomes part of the war effort. As the Allies push into Europe, Enzo and the government worry about the factory being bombed. So in 1943 he moves all operations out to a small town in the countryside about fifteen kilometres south of Modena: Maranello. That is why, to this very day, Ferrari is in the small hamlet of Maranello rather than the bigger city of Modena. Despite the move, the factory gets bombed twice in the last days of the war.

David Rosenthal

After the war, Enzo is at a crossroads. The factory is in significant disarray, and he has spent years building machine tools. Then he gets a visit from an old racing pal, Luigi Chinetti, an Italian who spent the war in exile in America, the man who brings Ferrari to America. Chinetti and Enzo had met when Enzo joined Alfa's team; Chinetti was a mechanic who became a driver, and ended up in New York. He tells Enzo about America. From Brock Yates's biography: Chinetti described the miracle of America, and there was a rich upper class whose tastes were European, whose aging European automobiles he had kept running through the war. He knew they would pay a king's ransom for Enzo's elite machines.

David Rosenthal

Legend says Chinetti convinced Enzo to abandon machine tools and focus on cars again. That is false; Enzo was planning to anyway. His non-compete was up and he could use the name again, so the clock was ticking. But Chinetti did convince him about America, and America was critical for Ferrari. And you know what wealthy Americans love? The cold shoulder of an artist creating cars mysteriously in a small Italian town, who is only interested in racing and couldn't care less about you. That sells cars, and Enzo knew it. This is why everyone believes he wasn't really a businessman.

Ben Gilbert

The whole persona: the dark sunglasses.

David Rosenthal

It was an act. He would wear the sunglasses in public, in press interviews and meetings with clients, and then when everyone left the room he'd take them off and put them on the table. He only wore them when crafting his image. So the machine-tool business is out the window. In 1947, the newly renamed Auto Avio Costruzioni Ferrari gets going. They build three cars just for team racing, enter fourteen races, and win seven, a 50% win rate. They didn't sell any of them.

David Rosenthal

Enzo Ferrari to this point in history has not sold a single car. He is 49 years old. This is the great founder myth of a young hotshot, except by 49 Enzo had never sold a car to a consumer. He had established the brand and the myth, but he did not sell a single car until 1948, when they introduced the Ferrari 166 at the Turin Motor Show. Dal Monte writes that the 166 MM Barchetta was a declaration of intent, a sports car as fast and powerful as it was beautiful, capable of winning races on circuits and roads all over the world and at the same time being the protagonist of the most prestigious concours events on earth.

Ben Gilbert

Enzo is figuring out how to create desire. These machines are beautiful and deadly. That is the point. You can race them and win, and you can drive them around town and look elegant, when they work. Because the Ferraris of this era, the late 40s through the 90s, were not the most reliable machines.

David Rosenthal

There is a fascinating thing about luxury: reliability is not actually a relevant part of how much you lust after the machine. From the luxury-strategy book, one of the anti-laws of marketing is to ensure your product has enough flaws.

Ben Gilbert

Boy, do Ferraris have flaws. Two of the first 166s are sold to American clients through Chinetti: one to Tommy Lee, a wealthy Cadillac dealer in Los Angeles, and one to Briggs Cunningham, a Procter and Gamble heir. Others go to European racers and nobility, including Italy's own most celebrated industrialist, Gianni Agnelli, the patriarch of the family that owns Fiat, one of Ferrari's very first customers. An amazing full circle, and we'll come back to it.

David Rosenthal

The next year, Chinetti takes a 166, one privately owned by the British nobleman Lord Selsdon, and enters it in the first running of the 24 Hours of Le Mans after World War II. Enzo doesn't think the car is ready and doesn't want to enter. Chinetti does it anyway, and they win Le Mans. It is the first major international race victory for a Ferrari car, but not run by the Ferrari team. It is the perfect illustration of the business model. It is a Ferrari that won, but it doesn't even have to be his own team. All anybody in America knows is that a Ferrari just won Le Mans, and now they've got to get their hands on one.

David Rosenthal

And it validates the engine. Enzo's reputation is as an engine guy. His comment: 'I sell engines, and the car I throw in for free.' Another: 'Aerodynamics are for people who can't build engines.' He was famously a late adopter of new technology. In the early days of F1, other teams figured out you should move the engine to the middle, above the rear axle, not the front. Enzo resisted, with this idea that in a carriage the horse pulls the carriage, so surely the engine belongs in front.

Ben Gilbert

God put the horse in front of the carriage.

David Rosenthal

It took years to adopt the correct, most balanced way, partly to let others prove it out, and partly because he realised being a late adopter only helped build the Ferrari myth, the old ways of doing things. There are funny entries in the record where, the same month Enzo is talking about how the engine belongs in the front, his own teams are constructing next year's mid-engine car. Say one thing, do the other.

David Rosenthal

It is worth pausing on what Ferrari actually is at this point, because it is pioneering: three separate things under one roof. Its own professional racing team, a world-class racing-car constructor building cars for its own team and for private clients, and all the support infrastructure needed to do both. Lord Selsdon couldn't just buy a 166 and drive it to France; you have to tune these things for the race, and Ferrari provided that. Other manufacturers had racing teams, but they were separate operations. Think of the Mercedes racing team today, a completely separate company. In Maranello, it was the same people making the same cars under the same roof. That is an incredible proposition for a client.

Ben Gilbert

It is really not that different from Thierry Hermès and his sons making saddles for the nobility on the boulevards of Paris and also for the jockeys racing on weekends. Same people, same saddles. But even in 1950 you're not just going to buy a Ferrari and race it. It is a highly maintained, serviced bundle of product and services that gets it ready for any situation. This was a weapon, not a mode of transportation. That is a trade-off clients were intentionally willing to make: not the most practical car, but an amazing race machine, and because I race, or imagine myself racing, I want to own a race machine.

David Rosenthal

In 1950 the pinnacle of motorsport arrives, the new Formula 1 World Championship. Ferrari becomes one of the founding teams and the only F1 team continuously operating from the beginning of the sport to today. If you buy a Ferrari, what you are buying is a direct connection to that ongoing heritage in a way you get with no other manufacturer. Many have tried that strategy since, less successfully, and we'll talk about why. This is the Ferrari formula.

David Rosenthal

The re-entry into racing comes with renewed tragedy. Enzo hires the young Alberto Ascari, son of one of the two mentors who died when Enzo was racing for Alfa. Enzo takes Alberto under his wing, almost like a surrogate son, until in 1955 Alberto is killed practising in a Ferrari at Monza, at exactly the same age his father died. Enzo vows never to become emotionally close to a driver again. But death was only just beginning to re-enter his life. Let me talk first about the beauty. The Ferrari 250 series, undeniably one of the most beautiful automobiles ever made, and the Ferris Bueller car.

Ben Gilbert

The car you see on screen in Ferris Bueller is actually not a Ferrari. It is a replica, essentially a retrofitted Ford, deeply ironic given what we'll talk about in a minute, and Ferrari sued the replica maker after the movie. There is not even a real Ferrari on camera in that film.

David Rosenthal

The first Ferrari Enzo sold was the 166, but fewer than a hundred were ever made, which must mean there was demand for 101, because of the famous Enzo quote that is the business strategy today: Ferrari will always deliver one car less than the market demands. In 1952 Ferrari comes out with the 250 series, the first real production Ferrari, and over the 1950s they manufacture a few thousand of them. Still a boutique, essentially handmade sports-car maker, but real production volumes. And this car is stunning. The one in Ferris Bueller is a 250 GT California. It was designed not by anyone at Ferrari but by Battista 'Pinin' Farina and his Pininfarina coachbuilders. Turns out coachbuilding was not Enzo's calling, but it was Pinin Farina's, the Michelangelo of car-body coachbuilders. Enzo built a partnership with him, first Battista, then his son Sergio, across multiple generations, lasting 61 years, until 2013. LaFerrari, the halo car, was the first fully in-house designed Ferrari, and during those 61 years I believe every single road-going production Ferrari except one was designed by Pininfarina.

David Rosenthal

Dal Monte writes that Enzo was looking for someone who could complement the mechanics of his cars with body designs, so that body and engine, elegance and power, were born and grew together. He wanted not a tailor but a coachbuilder who worked at his side, involved from the beginning of the project, not merely called upon to dress a finished car.

Ben Gilbert

As much as Enzo made noise about only making engines and slapping some aluminium on top, no. These things were thoughtfully designed hand in hand. Pinin Farina was the Jony Ive to Enzo's Steve Jobs. And Jony Ive comes back into this story later.

David Rosenthal

It is worth a moment on the Italian nature of luxury versus the French nature we covered on Hermès or LVMH. In both, what you buy is a mixture of craftsmanship and a dream. But the ingredients differ. The primary ingredient in French luxury is the dream, specifically a dreamlike connection to French royalty in a mostly imagined past. Buy a Birkin or a Louis Vuitton trunk, and you too can be like bygone nobility. The associated beauty is regal, soft, refined, quiet. No engines involved.

David Rosenthal

Italy doesn't have the same royal lineage. With Italian luxury the primary ingredient is craftsmanship, embodied in design and passion. The dream you're buying reinforces the emotion that went into the product, and the best illustration is the centrality of the designers. Most Hermès clients don't know who the designers are; it is just Hermès. In Italy it is totally different: is that Tom Ford Gucci, or Gucci in the wilderness, or Armani, Versace, Valentino, Brunello Cucinelli? The people and their passion are much more central.

Ben Gilbert

You go to Paris to absorb the history and look at the fine museums. You go to Italy to feel something, to let loose, to live life to the fullest. It is a whole different side of life they ask you to embrace.

David Rosenthal

And in this era, right after the war, the greatest designers and innovators in Italy were the car designers. And these are death machines. They are being designed by the country's most esteemed designers, beautiful death machines beckoning you to risk it all. And thus comes the yang to the yin of beauty: the tragedy and death that is such a part of Ferrari. In 1956, Enzo's own son Dino, whom he had been grooming to take over and continue the family lineage, his actual heir, dies at age 24 of muscular dystrophy. Not in a race car, but a horrible disease.

Ben Gilbert

That is even more tragic. It would be more romantic if he had died in a race car. Enzo spent 24 years keeping Dino safe, doing everything in his power to keep him away from race cars. And yet his son is taken by an illness he cannot control, pure randomness. It is shattering.

David Rosenthal

It is the shattering event among many in his life. Grief for his lost son, but also grief for his empire, which is gone. He has no heir; the line won't continue. After Dino's death Enzo stops going to races, a self-inflicted punishment. It is both the end of his family line, as he believes, and the end of the inherited company, in an old-school era where the business passed through the male heir. And yet, if you know Ferrari today, you might say: wait, there sure is a Ferrari who owns it. There is a current board member, Piero Ferrari, who owns 10% of the company and is the biological son of Enzo, very much alive at this time.

Ben Gilbert

So Enzo had an affair, one of many, with a woman named Lina Lardi, and it produced a son, Piero. The devastatingly cruel reality of Italy at that time and place is that illegitimate children by law did not exist. They were invisible. Piero was invisible, and could not take the Ferrari surname; divorce was illegal until the 1970s. So Enzo knows he has another son he loves, but who will never inherit his empire. A tragedy is the only word.

David Rosenthal

Then in 1957, at the Mille Miglia, this legendary thousand-mile race through Italy that ran from 1927 to 1957. There was at least one death in almost every year of it. Enzo loved it: 'It is the race of the people. It is a day when I feel my life is useful.' At this 1957 race, the last one ever run, a Ferrari flies off the road into the crowd, killing the driver and nine spectators, including five children. After the race, Enzo is charged with manslaughter by the Italian authorities. He is the owner of the company that made the car, and there is a high death count.

David Rosenthal

It is not just that he is the owner; the Catholic Church charges him with being the architect of the slaughter. The Vatican's official newspaper runs a story headlined 'Industrial Saturn,' after the Roman god who devoured his own children, calling Enzo a modern Saturn who continues to devour his sons. Ultimately Enzo is acquitted, and he reaches a compromise with the Vatican: he can continue racing so long as he never hires Italian drivers. Basically, you can kill young men, as long as you don't kill our young men.

Ben Gilbert

You might wonder why the drivers, and Enzo, are okay with the death. Enzo viewed it as a fundamental human expression of striving. His comment: one drives at high speeds in order to transcend oneself. Ken Miles, the famous driver on the Ford and Shelby side we'll get to, said, 'I'd rather die in a racing car than get eaten up by cancer.' It is the idea that we're going to die, but I feel most alive putting my life at risk, living right on the limit.

David Rosenthal

It is a way of fighting back against death. These cars are weapons to stare death in the face and say, 'not today.' And paradoxically, all this tragedy is great for business. It only makes Enzo and his Ferraris more romantic and coveted. It is like Porsche when James Dean died in the 550 Spyder, or Paul Walker in the Carrera GT. It made those cars legendary. And here is Ferrari, its cars labelled forbidden fruit by the Pope. If you're a middle-aged man having a crisis, what more could you desire? Throughout the late 50s, sales of the 250 are ramping, particularly in America. By 1960 production reaches 300 cars a year, and by 1962 it is 500, split roughly a third each between Italy, America, and the rest of Europe.

David Rosenthal

By 1963 Enzo is 65. He'd had all this death, and his plan had been to hand the company to Dino, but Dino is dead. At a press conference a journalist asks what will happen to Ferrari when he's gone, and he replies with the famous line attributed to Louis XV of France: après moi, le déluge. It all ends with me. Piero at this point already works at Ferrari, but it is a secret that he is Enzo's son. So the question remains: what becomes of the company? Enter the Ford Motor Company. Much of this is from the book 'Go Like Hell,' which the movie is based on.

David Rosenthal

In 1963 Henry Ford II, grandson of Henry Ford I, with Edsel in between, is looking to make his mark. He is third-generation ownership, hearing barbs that this was your grandfather's and your father's company. He decides Ford needs to be in racing to change its image and stimulate sales. Meanwhile Ferrari is on a hot streak, having won Le Mans in 1958 and then every year from 1960 through 1965. So if you want to enter racing, you either beat Ferrari or you own Ferrari.

Ben Gilbert

The Deuce, as Henry Ford II was known.

David Rosenthal

And Enzo had great nicknames too. Before he became the grand old man, he was Il Commendatore and the Drake. The Deuce gets word, weirdly through Ford's German subsidiary, that a mysterious letter arrived saying an internationally known Italian factory was interested in selling. You should be suspicious of how this information reaches Ford, but Ford isn't. They figure out it is Ferrari and begin a process to buy it. Ford has essentially no racing capability of its own. The asking price was $18 million, but Ford easily negotiates it down to 10 million, which should have seemed too easy.

David Rosenthal

The agreement that hits Enzo's desk is the craziest pitch. Two companies form: one called Ford-Ferrari, 90% owned by Ford, making road cars, and a second called Ferrari-Ford, 90% owned by Ferrari, the racing team. Enzo digs into the fine print and realises: if I want to go racing and Ford does not, who decides? Ford says, we're buying your company, we have final say, we control the budget. Enzo hates this, and in dramatic fashion blows up the deal at the finish line, all while the papers were reporting that the Americans were about to buy this Italian national treasure. Henry Ford II is incensed. In May 1963 he tells his lieutenants, 'We will go to Le Mans and beat his ass.'

Ben Gilbert

There is a great line in the Yates book about Enzo's opinion of Americans: he realised the fundamental truth to selling European luxury goods to Americans. Treat an American like a hick and you'll own him for life.

David Rosenthal

The whole Ford versus Ferrari movie is what happens next, dramatised but factually pretty accurate, and highly recommended. Ford, with unlimited budget, enlists Carroll Shelby, the driver Ken Miles, and a crack team of American mechanics, and after a few years they beat the Ferraris in the 1966 Le Mans, finishing first, second, and third. But this is a complete sideshow. What are Enzo's true intentions? The blow-up was done to market Ferrari's exclusivity, and to signal that Enzo was willing to do a deal, on his terms, with the right partner, so long as he could keep racing.

Ben Gilbert

Ferrari got a dual benefit. It was great for the myth: 'we were going to sell to these big ugly Americans, but they wanted to take our racing, and we said you'll have to kill us first.' And it signalled to the market that he might be open to a deal. Any last misconception that Enzo wasn't an excellent businessman and negotiator should be dispelled.

David Rosenthal

Through all this, Enzo is doing great, in his late 60s, reinvigorated by the battle. Then in 1968 he contracts kidney disease, and it is bad. In 1970 he goes into organ failure and is hospitalised for months. He should have died. So he gets serious about selling. He sniffs around, talks to his old friends at Alfa, but at the end of the day there is only one correct buyer: Gianni Agnelli and the Fiat empire. In 1969 Enzo sells 50% of Ferrari to Fiat immediately, with a secret agreement that, upon his death, which he thinks is imminent, Fiat acquires another 40%, taking their stake to 90%, and 10% transfers to Piero. As much as he can, Enzo wants to legitimise Piero, give him the Ferrari name and a stake, so the bloodline continues. And, just as with Ford, Fiat takes the road-car business but Enzo retains final authority over racing.

Ben Gilbert

The incredible irony is that the end was nowhere near. He lives another 19 years, until 1988. He lives to launch the F40. Two full-circle moments: Enzo started his career applying for a job at Fiat and was turned down, and Gianni Agnelli was one of the very first Ferrari road-car customers. And when you look at the deal, doing the lira-to-dollar exchange in 1969, they sold half the company for a little under $3.5 million, valuing all of Ferrari at $6.8 million.

David Rosenthal

Enzo really wanted this deal. Even Ford thought Ferrari was worth 10 to 18 million earlier in the decade, but Enzo basically had one bidder and thought he had no exit path. It needed to stay in Italy and land with a strong, thriving car company and family, the Agnellis. Fiat got a steal. And this is probably the moment the false legend emerges that Enzo only cared about racing, because the fact pattern fits: he wanted to spend his last days racing and did a not-great deal with Fiat. The only reason is that he truly thought he was about to die.

Ben Gilbert

The state of Ferrari was grim, too. The factory needed investment, the racing programme was unbelievably expensive, they faced very real competition from Lamborghini, founded in 1963 specifically to challenge Ferrari, and there were manufacturing headaches from Italian labour unrest. Lamborghini had just launched the Miura, a truly excellent car, arguably a better Ferrari than a Ferrari at the time. So Fiat and Agnelli had to be the buyer to steer Ferrari through this period.

David Rosenthal

Right after the 1970 sale, Enzo goes into organ failure and is hospitalised for months, which makes it fortuitous he had already done the deal, so there was management to keep the company running. Miraculously, he recovers. In spring 1971, the grand old man is back in Maranello, but it is a Ferrari he barely recognises. Fiat has come in. And this is where he intersects with the young man who would carry Ferrari's legacy for the next forty years: Luca di Montezemolo.

David Rosenthal

In 1971, back in the office, Enzo tunes into a talk-radio show and discovers a young man who brings a breath of fresh air into his life. Montezemolo, to many listeners, is already a living legend. As much as anyone besides Enzo, Luca di Montezemolo is Ferrari. I was lucky to speak with him for a few hours. He was born in 1947, the same year the modern Ferrari commenced operations, in Bologna. He moved to Rome as a child, where his best friend growing up was the son of Gianni Agnelli's sister, so Luca grows up almost like a member of the Agnelli family and develops a close relationship with Gianni, who was like a combination of an older brother and a father to him. In 1970 Luca moves to New York to study international law at Columbia, while also pursuing a career as a rally-car driver.

David Rosenthal

On that fateful day in 1971, Luca the rally driver is a guest on a popular call-in radio show, and a caller accosts him, chastising the entire motorsport industry, much like the Pope in 1957, saying racing is evil, dangerous, bad for the environment, a sport just for rich people with no value to society. Luca rises to the occasion and gives a passionate, eloquent, poetic defence of motor racing, and shuts the caller down. And who happens to be listening but Enzo Ferrari.

Ben Gilbert

He is the perfect person: Enzo's kind of guy, but also a pseudo-family member of the Agnelli family. A candidate pool of one.

David Rosenthal

Enzo calls the station: 'I have to know who this kid is.' The quote Luca told me Enzo gave the station: 'This boy has big balls. I want to talk to him.' They meet, and Enzo says, 'I like you, you've got big balls. I've been away from my business too long. What I need is an assistant, but really a spy who can go through the organisation and report back what is actually going on in my company.' Luca takes the job. And when Enzo learns of Luca's connection to the Agnelli family, he is even more delighted: now I can have a spy at Fiat too.

David Rosenthal

Enzo first sends Luca to figure out what is going on with road-car sales. Luca reports back that it is not good. This is a tough time, the early 70s: the oil crisis, and any car with an engine over 2 litres taxed an extra 40% in Italy and much of Europe. The whole sports-car industry is in the dumps. Enzo says, fine, that's Fiat's problem now. My real assignment: go to the next Formula 1 race, observe, and tell me what you think. At this point the F1 team is in a historic drought, no drivers' or constructors' championship in ten years. Luca observes and calls Enzo: I advise we take the cars home, we have no chance of winning. Enzo says we're not taking them home, but what do we do? Luca says the sport has changed. This isn't just an engine sport anymore. We're in the era of Colin Chapman and Lotus and aerodynamics, and the chassis matters far more, and the Ferrari team is stuck focused entirely on the engine.

David Rosenthal

So Enzo makes Luca team manager of the Ferrari Formula 1 team, with a mandate to fix it. Luca is not even 30. He revamps the team, brings in great chassis and aerodynamics people, and recruits Niki Lauda as number one driver. In 1975, Lauda wins the drivers' championship and Ferrari wins the constructors', ending the ten-year drought. Luca is now revered across Italy, this young hero who saved the national team, still not 30 years old.

Ben Gilbert

Where is Enzo's house in all this?

David Rosenthal

Around the corner from the factory in Maranello, a farmhouse. In 1972, after the illness but before Lauda's victory, they build a full racetrack adjacent to headquarters that loops around Enzo's house, so he can walk out and watch cars being tested, a custom racetrack only for Ferrari's R&D. But he needs Luca to change the culture; Enzo can't, he is a prisoner of his own myth. Then Enzo starts to get jealous of young Luca. There is no personal animosity, but a couple of things happen. The next year, Niki Lauda catches fire at the Nürburgring, is severely burned, should have died, and comes back to race in contention for the championship. He narrowly misses winning it, and if you're interested, watch the movie 'Rush.' But Enzo, very experienced with drivers' brushes with death, loses faith in Lauda: he fears death now.

David Rosenthal

Luca still believes in him, so there is conflict, though it never gets personal. All of this combines, and Luca can't stay. They decide it's better if he leaves the F1 team and Ferrari day-to-day and goes to work for Fiat in Turin, remaining on the Ferrari board. Enzo thinks he'll still have a spy at Fiat. This is another tragedy: it is the end of Ferrari's racing glory in Enzo's lifetime. The road-car business falls on ugly times, and the last decade-plus of Enzo's life is a real whimper in Ferrari's history. But there is one little bang: his last car, Ferrari's first official supercar halo car, the F40, fittingly the last car Enzo makes before he dies.

Ben Gilbert

The F40 was an incredible raw beast. There is no leather; the door handle is a piece of string. It is the rawest racing machine in its purest form, throwing out everything not absolutely required for the lightest possible car. Lots of raw carbon fibre, not the cool-looking kind. Unlike the F50, the Enzo, LaFerrari, and F80 that followed, this is not a luxury supercar. Sitting in it, you're not thinking 'I'm a rich person,' you're thinking 'this thing is trying to kill me at every angle.' The videos of people crashing F40s are tragic. If you get in and don't know exactly what you're doing, you'll crash.

David Rosenthal

The F40 punctuated the end of the Enzo era. It is a supercar like the modern ones, but it had every flaw of the Enzo era: not practical, purely about being a race car, every compromise made to get there. Ferrari will never make another like it. F40 means the 40th anniversary of the modern Ferrari's operations, 1947 to 1987. Then the next year, at age 90, the grand old man finally passes away. Enzo Ferrari dies in the summer of 1988. Poetically, in the next Formula 1 Grand Prix after his death, Ferrari finishes one-two at Monza, the Italian Grand Prix, the only race Ferrari won that season.

Ben Gilbert

It's worth noting: the Agnelli family gets the 40%, Piero gets the 10%. But the valuation this time is completely different. Our friend Arvind Navaratnam at Worldly Partners scoured the old annual reports. The 1988 report shows the lira paid to acquire the remaining 40%, and at that exchange rate it is $77 million, valuing the company at $192 million in 1988, versus roughly $6.8 million in 1969. Two crazy things at once: how much the valuation increased, and that Fiat and the Agnellis acquired 90% of Ferrari for about $72 million in aggregate. And that as recently as 1988 it was worth only $192 million, when this is a company that recently traded over $90 billion.

David Rosenthal

This highlights how different a company Ferrari was when Enzo died, and how much Montezemolo transformed it when he returned as chairman. But for the moment, the slow-motion disaster continues. Fiat's best solution to the road-car problem is to produce more road cars, the cardinal sin of luxury-strategy management. Ferrari produced 7,000 Testarossas over seven years. Compare Lamborghini, which made only 2,000 Countaches over sixteen years, twice as long.

Ben Gilbert

Tiny numbers for any normal car company, but when something should be as rare and special as a Ferrari, and a company you don't even consider a competitor is making a more exclusive product and managing it better, that is not good. Total Ferrari production in 1982 was 2,200. By 1991 it had grown to 4,500. They just kept ramping. Not the right fix.

David Rosenthal

1991 was the last year of this interregnum before Luca returns. It got so bad that demand evaporated and, for the first time in history, cars went unsold. They had to furlough factory workers and shut down the factory. So Gianni Agnelli calls Luca: it's time to return, we are putting Ferrari in your hands. And Luca di Montezemolo returns as chairman. Note, in Italy the chairman is the most powerful title, and the CEO reports to the chairman. Luca had been away from Ferrari day-to-day for almost fifteen years, during which he became CEO of the beverage company Cinzano, another Agnelli company, gaining CEO experience. He also organised the Italia '90 World Cup. My favourite story: for the closing ceremony he convened, for the first time, the Three Tenors, and the way he convinced Pavarotti to join, because the big star didn't want to, was by giving him an F40.

David Rosenthal

When Luca knows he's returning, he goes and buys a 348, the flagship Ferrari at the time, just to see the state of things. His quote: the 348 was the worst car we ever made. Everything was missing. It had no personality, no technology, no power. Driving it, he'd pull up to stoplights and drag race, and he was getting beaten off the line by Volkswagen Golfs. In a Ferrari.

Ben Gilbert

What do you attribute the deterioration to?

David Rosenthal

It was Fiat. It was all they knew how to do: increase production, cut cost, share parts with Fiat cars. Ferrari road cars went from being the same thing built by the same people as the racing cars, in the same factory, to, under Fiat control, not the same thing. It would be too far to say they were repurposed Fiats, but they had lost that connection to race machines. The Japanese sports-car industry was on the rise, and enthusiasts were saying the Italian car makers were dead. Luca has his test drivers buy a Honda NSX and do his own version of the Pepsi Challenge: drive the NSX and the 348 as hard as you can around the test track. They come back and say there is no competition, the NSX blows us away. A Honda.

Ben Gilbert

It is one thing if Lamborghini beats them. But if Honda is making a better sports car than Ferrari, there is a real problem.

David Rosenthal

So Luca comes up with three priorities: the team, the technology, and the myth. First, the Formula 1 team. Going back to his great quote: there is not a direct correlation between victories on the track and the number of cars you can sell, but if for many years you do not win, you do not add wood to the fire of the myth. In the competition you can win or lose, but you cannot only lose. The team hadn't won a championship since 1979. Luca recruits the dream team: Jean Todt as team principal, Ross Brawn as race engineer, and Michael Schumacher as number one driver. It takes a couple of years, but they unleash absolute domination. From 2000 to 2004, Schumacher won every drivers' championship five years running, and Ferrari won every constructors' championship. Under Montezemolo's tenure, Ferrari wins nineteen drivers' and constructors' championships, more than Enzo.

Ben Gilbert

Then the technology. We can't have a Honda NSX outclassing a Ferrari. This is where the feelings about technology change, from being a late adopter to pushing the bleeding edge. Today Ferrari spends more on R&D as a percentage of revenue than most other car companies.

David Rosenthal

Enzo didn't really care much about technology. First they fix the 348 with stopgaps, then kill it and replace it with the 355, a glorious car that checked every box. It was modestly priced by Ferrari standards, $127,000, much more user-friendly to drive, and it made sense even if you weren't a track driver. By 1997 it accounted for 70% of sales.

Ben Gilbert

The 355 I'd put in the category of a Rolex Submariner: a signature of the brand, perfect product-market fit, priced perfectly, deeply understanding why the customer is buying it.

David Rosenthal

And Luca massively cut production. In 1991 Ferrari made 4,500 cars; by 1993, just two years later, he brought it down to 2,300, almost in half. Production would climb again as the 355 was well received and the back-order list rebuilt, but it would not eclipse that 1991 peak until 2006, a full fifteen years later. Third and most important: the myth. Luca is the one who realised Ferrari is a luxury company. To Enzo, Ferrari was a racing company that sold a connection to racing. Enzo was a marketing genius, but you couldn't talk to him about how Hermès managed its business; he had no idea what Jean-Louis Dumas was doing in Paris. Luca knew exactly. Luca institutes the waiting lists, the presentation ceremonies when your car is delivered, the custom luxury leather luggage fitted to your Ferrari. Luca institutes the luxury strategy at Ferrari.

Ben Gilbert

Where did Luca come up with this?

David Rosenthal

He comes from a completely different background than Enzo, who didn't know a Birkin from a Coach bag. After Dino's death Enzo never got on an airplane again and didn't leave one region of Italy. Luca lived all over the world, ran the World Cup, was CEO of a drinks company, knew all the luxury families and companies, and studied what they did.

Ben Gilbert

The other big piece: anytime you see a Ferrari, it needs to scream Ferrari. The 355 looked like all the classic Ferraris and race cars, but was much easier to drive. There should be unification between what we sell to people and the race cars. In Enzo's day you could excuse a car not functioning on the road because it truly was a race car. By the 1990s and 2000s that wouldn't fly; clients want to drive these on the street.

Ben Gilbert

Luca also did things that set the company up short-term but added long-term risk. Ferrari was operating in the red, generating real losses from 1992 to 1994, back to break-even by 1996 and profitable by 1997. One of these was licensing the brand for merchandise. There were smart versions, luxury goods and sportswear, and it is basically 100% margin, dropping straight to the bottom line, so in dire straits it is very good. But they put the prancing horse on some real garbage. My favourite: by 2009 they put it on an Acer netbook. The apex luxury car brand licensing itself to an underclocked plastic netbook, the microcosm of brand destruction.

David Rosenthal

There is nuance. For Louis Vuitton or Hermès or Patek Philippe or Rolex, this would be all bad. Ferrari is different. It is an apex luxury brand, but unlike those companies it also has a couple hundred million rabid fans it needs to serve, and there is not actually a tension there. Ferrari clients and collectors aren't upset that Ferrari has a couple hundred million commoner fans; they are happy about it. Ferrari is both a luxury brand and a giant international sports team. They talk about the tifosi, the hundreds of millions who are fans of the brand and the team.

Ben Gilbert

Hermès doesn't have a couple hundred million teenage girls with posters of Birkins on their walls to please. Ferrari is Hermès and Manchester United smashed together. That does validate the merchandise-licensing strategy much more, though not the Acer netbook.

Ben Gilbert

It was important to Luca that the factories be first-rate, so he brought in great architects to redesign them. If you look at Ferrari factories today, they have trees in them; he brought in the trees. My favourite thing about Ferrari is the manufacturing process, both because it is cool and because of the business model it enables. After 1994, Ferrari does not have a stock of cars sitting at dealerships. They don't manufacture and then find buyers; it is the other way around. For every car, they only start manufacturing after you order and customise it. And by this point every Ferrari is unique. There is so much customisation that no two rolling off the line are identical.

David Rosenthal

Ferrari factories are vertically integrated to the nth degree. Most car manufacturers are systems integrators, buying from a network of thousands of suppliers of common parts, taking five to ten years to build out a supply chain. Not Ferrari. Trucks roll up with raw ingots of aluminium, and they cast entire engines themselves in Maranello. They build engine moulds out of sand, run 700-degree furnaces, and operate an entire foundry on site. They do the same for body panels and stitching the seats.

Ben Gilbert

It reminds me of Rolex. And there is another dimension. Most car companies, even Porsche, Audi, and Lamborghini, base many models on shared platforms. The Lamborghini Urus is the same platform as the Porsche Cayenne, which is the same as the Volkswagen Touareg or the Audi Q8. When you buy a Urus you're buying a car essentially the same as a Touareg. No Ferrari shares a platform with any other car.

David Rosenthal

Some Fiat parts and switches had crept into Ferraris in the interregnum, and Luca stops all of it: the only things that go into Ferraris are Ferraris. Because everything is customisable, they kept manufacturing very flexible and manual. They can make any car on any line. Humans do manual work at every station except one, affixing the windshield, for safety. It is crazy and unheard of to be able to make any car on any line. It is inefficient; they don't invest in an automated production line. But they can operate on a much shorter timescale between design and delivery, be really iterative, change an engine casting spec without involving a supplier, and get F1 learnings into cars quickly since it is right across the street.

Ben Gilbert

You'd never want to make 100,000 cars a year with the Ferrari model. In fact you barely want to be doing 14,000. But the pro is responsiveness. This is how bespoke handmade craftsmanship applies to a modern automobile company, the same dynamic as Hermès. And part of what you're buying is the lore: a pseudo-handmade, bespoke, inefficient process. A team of artisans and experts, aided by technology, making my Ferrari.

Ben Gilbert

On markets and growth. When we talk about caps on units, it is not that they can't produce more without diluting the brand; it is that they can't sell more into a current market without diluting it. New markets are perfectly allowed, as long as they don't change perception in current markets. Geographic segmentation is a great luxury strategy. Luca starts selling in China meaningfully for the first time, and the timing was perfect: in Europe it was becoming less fashionable to display wealth, and in China it was extremely fashionable. Anytime a new geography rose in wealth, there was a whole new area to sell into without changing perception in existing markets.

David Rosenthal

There is a subtle point specific to Ferrari. They sell so few cars into a given geography that it is a special experience even to see one on the road. Owning one is rare and special, but even seeing one should be rare. The minute that stops being rare, part of the myth dies.

Ben Gilbert

And since a large number of Ferraris are owned by people with ten, twenty, thirty Ferraris, they can soak up a lot of units into garages you never see. So if you're managing scarcity, you have an incentive to keep selling to the same person, generating a sale without a Ferrari on the streets feeling commonplace.

David Rosenthal

There is one other thing Ferrari takes on during this era. Many clients, particularly Americans, want a family Ferrari. A 45-year-old man who wants to be on the track actually spends most of his time unable to be, but still wants to feel fast and associate with the brand. He might need to drive his kids to school, or be driven to a business meeting. Really, he'd like a four-door Ferrari.

Ben Gilbert

David, stop.

David Rosenthal

I know, disgusting. And that is why Ferrari takes the Maserati brand under its wing. The Maserati brothers' company had gone through ownership changes and ended up with Fiat, which in the late 90s gives management of Maserati to Ferrari. Now they can have models that are Maseratis, not Ferraris, but connected. The Quattroporte launches in America to great demand, though it wasn't a good car at first and took years to iron out reliability. It is a brilliant brand strategy, almost like Rolex and Tudor. A Tudor is never going to be a Rolex, but there is a great use case for it.

Ben Gilbert

Maseratis are not made in Maranello, right?

David Rosenthal

No. Ferrari gets market intelligence from launching a Maserati in a market, but there are no manufacturing synergies; R&D is pretty separate. They showed great restraint in never launching a Fiat-Ferrari car or standardising on platforms the way Volkswagen Group does. Remarkably, Ferrari kept the soul of a standalone company even while 90% owned by Fiat, and Luca and Piero, with his 10% and board seat, are a huge part of that continuity to Enzo and the Ferrari family. Speaking of the Fiat and Agnelli empire, something big is about to change as we enter the 2000s: Gianni Agnelli passes away, and the Fiat empire falls into crisis.

David Rosenthal

In 2003 Gianni Agnelli dies. Tragically, the logical heirs in the next generation had also died young. When Gianni dies, his brother Umberto takes over but lives only another year, passing in 2004. The empire is in chaos, and Fiat is really struggling, with falling sales, a mountain of debt, and a collapsing share price. The last surviving Agnelli of that generation is Susanna, mother of Luca's childhood best friend. She calls Luca after Umberto dies and asks him to take over as Fiat chairman, in addition to Ferrari, to serve as a steward and bridge to the next generation while they get the house in order.

Ben Gilbert

So he is chairman of the parent company and Ferrari, which they own 90% of.

David Rosenthal

The chosen next heir is John Elkann, whom you may know today as head of Exor, the publicly traded Agnelli family holding company. He is 27 at this point, a kid, like Luca back in the day. Luca and Elkann have to work together to save Fiat. First they turn to Sergio Marchionne, a turnaround expert and financial engineer who had been CEO of SGS, a Swiss consumer-products testing company in the Agnelli empire, which he had completely turned around. He joins as CEO in 2004, with Luca as chairman and Elkann as the family representative. The Agnelli empire is larger than just Fiat; unlike the Ford family, they invested in and built many businesses across generations.

David Rosenthal

Together the three miraculously turn Fiat around. First, they launch the smash-hit new Fiat 500, the mass-market city car for Europe. There was precedent in Volkswagen relaunching the Beetle in 1997. The Fiat 500 sells a million units in five years and wins the 2008 European Car of the Year. It is funny that on the Ferrari episode we're extolling the Fiat 500, but it becomes important and path-dependent to Ferrari's trajectory. It was designed by Frank Stephenson, who had been Luca's in-house design guy at Ferrari, so there is a lineage there.

David Rosenthal

Marchionne also totally restructured Fiat's operations; he was an efficiency and cost-cutting specialist. And Fiat had an ill-fated partnership with General Motors. Marchionne gets them out of it and engineers GM paying $2 billion to Fiat to end the partnership. Without that $2 billion, the company almost certainly would have died. So they come in in 2004, return the company to profitability within two years, and get a handle on the debt. In 2007 the Fiat 500 launches; in 2008 the financial crisis hits, and all the US car companies are in bad shape.

Ben Gilbert

Fiat just barely got their house in order in time.

David Rosenthal

Marchionne says we can play offense. He engineers a partnership with Chrysler, which had effectively been nationalised, taken over by the US government, and was in the worst position of the big three. They partner in 2008 and fully acquire Chrysler by 2014, creating Fiat Chrysler Automobiles, FCA, basically for free; Fiat paid zero or almost zero in equity value. Chrysler, Dodge, Jeep and all its brands are a thing today, part of Stellantis, because of what Fiat and Marchionne did during the crisis. Stellantis is the name for the merger between FCA and Peugeot, another of those French car companies we're not going to make an episode about.

David Rosenthal

As Fiat stabilises, in 2010 Luca steps down from the Fiat chairmanship and returns full-time to Ferrari; Elkann assumes the Fiat chairmanship. But there is one cost to taking over Chrysler: Fiat had to assume Chrysler's debt, including about $5.5 billion owed to the US and Canadian governments for the bailout. The combined FCA debt balloons to over $11 billion. Marchionne announces to Wall Street a plan to reduce that from over $11 billion to $1 billion or less by 2018. Some of that comes from cash flow, and some might come from other places.

Ben Gilbert

So Marchionne needs a lot of cash to meet his promise. Where is an easy place to find it? He is going to IPO Ferrari and use the proceeds to help pay down the FCA debt. But there was a huge conflict brewing between Luca and Marchionne. Both incredible operators, but cut from totally different cloth. Luca is the ultimate car guy, a great businessman and a great executor of the luxury strategy, but in his heart the cars always come first. Marchionne is not a car guy; he came from a testing company. He is a financial engineer and empire builder.

David Rosenthal

The great tragedy is that it could have been, and was, a beautiful partnership; they saved Fiat together. But they couldn't coexist and share power. For a while, Luca going back to just Ferrari made it work. But once Marchionne needs the cash and turns to Ferrari, they are on a collision course, because IPOing Ferrari is anathema to Luca. Being public means delivering consistent, predictable growth: shipping more cars, more models, more clients, raising prices, on a Wall Street calendar. Luca isn't opposed to those things in a vacuum, but he wants to do them thoughtfully, over time, with flexibility.

Ben Gilbert

You want the products to be living, breathing things, to rapidly change your mind in the face of new conditions. One of Luca's very first actions on returning after Enzo's death was to cut production by half. Can you imagine announcing to Wall Street that the right thing next year is to cut production by half?

David Rosenthal

Here is what happens. Thanks to Chrysler, it is not an option not to pay down the debt; the empire has to get the money. So the choice is made for them: they side with Marchionne, who is the guy to run it as a public company. In September 2014, Marchionne unceremoniously fires Luca as chairman of Ferrari. The pretext is that the F1 team performed poorly, which was true, but just a few years earlier Luca had engineered the greatest dynasty in F1 history. Part of the reason the team struggled then was that F1 had switched to hybrid powertrains and Fiat never developed hybrid technology, so Ferrari had nowhere to turn for a head start.

David Rosenthal

Bernie Ecclestone, the F1 impresario, whom Luca did not always see eye to eye with, gives a quote when Luca is fired: 'Luca leaving is for me the same as Mr Enzo dying. He has become Ferrari. You see Luca, you see Ferrari. You don't see anything else.' The context that makes it more impactful: in the FOTA breakaway attempt a few years earlier, a group of teams tried to bust Bernie's hold on F1 and start a rival league, and that was led by Luca. Luca was Bernie's arch-adversary, and here is Bernie paying tribute.

Ben Gilbert

With Luca gone, the path is cleared to IPO Ferrari. In 2015, Fiat and Marchionne float 10% of their 90% stake on the New York Stock Exchange, for an initial total market cap of $9.8 billion, raising just under a billion dollars in cash that Fiat uses to pay down debt. Up from $192 million in 1988. But still nowhere near the heights to come. That delta is Luca's legacy, turning Ferrari into a real business.

David Rosenthal

And Marchionne had another financial engineering coup up his sleeve. As part of the spin-off, they effectively transfer another $3.2 billion in FCA debt to Ferrari. So in total, FCA gets almost $4 billion in debt reduction out of the transaction. It was perfectly fine to do this because Ferrari turns into a great business perfectly capable of paying it down. From Marchionne's side, it all makes sense: very little risk, and it helped FCA become a real going concern that exists today.

Ben Gilbert

And not just a little engine. The value unlock is unprecedented. The company IPOs at $9.8 billion in 2015, and within a few years is flirting with $90 to $100 billion. Way higher than Stellantis's market cap. Investors often talk about unlocking value by spinning something off, getting rid of the conglomerate discount, isolating centres of value. That happened here. Ferrari was not appreciated inside Fiat for the gem it was, and as a standalone public company reporting its own financials, people piled in.

David Rosenthal

And then, in 2018, just three years after the IPO, the same year Marchionne had promised Wall Street he'd pay down all the debt, he dies suddenly and unexpectedly of cardiac arrest following complications from shoulder surgery. Again and again, those closest to Ferrari, tragedy. The empire is thrown into chaos, though in a much more stable place than when Gianni died. Within Ferrari there is a parade of caretaker CEOs over the next couple of years, culminating in 2021 with the current CEO, Benedetto Vigna, a complete outsider, a tech guy and physicist who went into semiconductors, and who holds one of the patents for the accelerometer used in the original iPhone and basically all mobile phones today. A semiconductor guy, which makes sense for the direction Ferrari and technology are heading.

Ben Gilbert

So what happens after the IPO? A lot of what you'd expect. Ferrari increases production and goes further into luxury retail goods, but bifurcates the strategy. First they clean up all the old crappy merchandising and narrow it to brand licensing in specific categories with specific partners: Luxottica for glasses, Montblanc for pens, Richard Mille for watches, Puma for shoes. Then they go into a lifestyle category of their own, first-party products, essentially Ferrari runway fashion. Traditionally about 90% of customers are men, average age 52, but I believe 35% of people buying the lifestyle merchandise are women. They're opening up the aperture: giving people more tokens to adorn themselves in Ferrari, not just cars. I'm not sure I'd do it, but I get why.

Ben Gilbert

They also opened theme parks, two of them, in Spain and in Abu Dhabi next to the F1 racetrack, totally outsourced to third-party partners like a licensing deal. When I first read this I was a head-scratcher, but I get it: people want to experience the brand in a more visceral way. These products are so full of emotion that merely seeing one drive by every few months is not the way to cultivate fandom.

David Rosenthal

On the other hand, a lot less than you'd expect changes, and Ferrari becomes even more independent. If you take as an axiom that the most important part of the soul of Ferrari is being a Ferrari and not a rebadged Fiat 500 or Volkswagen Touareg, then Ferrari today is even farther from Fiat than before the IPO.

Ben Gilbert

Today it is still 10% owned by Piero Ferrari. A little over 20% is owned by the Agnelli family through Exor, but that 20% was 90% before the IPO and 81% right after; they've sold down the stake over time. 68% is now owned by public shareholders, an independent company. The voting shares are a different story: together Exor and Piero can vote about 49% of the voting shares, so they only need to sway one or two percent of the public float to control the vote as a bloc.

David Rosenthal

Now the model range. Ferrari effectively makes four types of cars consumers can buy. 85% of units shipped fall into what they call the range, cars a few hundred thousand each before customisation: the collection of sports cars and GT grand-touring cars that have always been the core. Mid-engine V8s and V6s, front-engine V12s, and hybrids as a newer addition. Your Amalfi, Roma, Testarossa, 12Cilindri. That percentage sometimes flexes higher when they're not shipping a supercar, since the supercars, the F40, F50, Enzo, LaFerrari, and now F80, are not made all the time; they make them for maybe 24 months, once a decade.

Ben Gilbert

At the end of the Luca era, that was the whole lineup: the core range and the occasional halo supercar. Now 10% are the special series, running between $500,000 and a million before customisation.

David Rosenthal

These are the high-performance versions of the range cars. Like BMW's M series or Mercedes-AMG, though people would scoff at that comparison. They're racier than the typical models, but not track-only; higher-end, more limited production, and there is a lot of demand.

Ben Gilbert

Then the remainder are the Icona series, about $2.3 million for the current V12 Daytona SP3. And the supercar, depending on the year only 1 to 5% of units, but extremely important to profits given they run three and a half to five million dollars. So they've added a second series to each aspect of the core lineup, roughly doubling the model range.

David Rosenthal

The Icona exists for a particular reason I'll explain when we get to financials. The stated reason is that they pay homage to Ferraris from history, like the Daytona or the Monza. Clients invited to buy a supercar or an Icona own at least ten new Ferraris, maybe twenty-plus, tens of millions of dollars deep. These are the Birkins and Kellys; you don't walk in off the street. And they take customisation to the extreme, with models literally called one-off: a custom car with a custom body style for very special VIP customers, never disclosed.

Ben Gilbert

One model you haven't mentioned is the FUV, the Ferrari utility vehicle: the Purosangue, meaning pure blood. This is a delicious bit of Ferrari-ism. The market really wants an SUV; 60% of Porsches sold are SUVs. When you go up-market to Lamborghini, which looks a lot like Ferrari on production volume, only about 11,000 cars a year, and is part of the VW group, over 60% of Lamborghinis sold are now SUVs. The classic idea of a guy driving a Lambo, and 60% of that brand's cars are soccer-parent mobiles. Same thing that happened at Porsche, which was the 911 company and is now the Cayenne and Macan company.

David Rosenthal

So people want one from Ferrari. What does Ferrari do? They don't call it an SUV, they call it an FUV. They debut a low-top four-door almost-SUV called the Purosangue, translating to pure blood or thoroughbred, almost overcompensating with the name to insist it is as thoroughbred a Ferrari as you can own. And it has a naturally aspirated V12; it is a real Ferrari under the hood.

Ben Gilbert

The disciplined thing: they capped total production at 20%. This ensures that when you see a Ferrari, it stays your classic idea of one. It protects the brand and sacrifices a lot of short-term profit, and I have immense reverence for that discipline. They sell about 2,500 to 3,000 Purosangues a year globally, not 60,000. I actually saw one this week at an event, valet-parked, and thought, I've never seen one before, which is exactly how it should be.

David Rosenthal

They've also become very diligent about the waiting list. They are essentially sold out for the next two years. Most car companies can't tell you what sales look like next quarter; Ferrari knows exactly what their sales will be and to whom through the end of 2027, maybe into early 2028. If you want one sooner, you buy used.

Ben Gilbert

On price: the average selling price of a Ferrari is about $500,000, up from $350,000 in 2022. So they've taken price a lot. Models technically start at $280,000, like the Roma Spider, but that is on a two-year wait and before customisation, which adds anywhere from 20% to 100% of the price. And averages hide the most interesting data. Ferrari is incredibly top-heavy, in two ways. First, the most engaged customers contribute an outsized share of revenue. Second, more interestingly, the most expensive models provide a huge amount of the profits for the entire company.

Ben Gilbert

Take just the F80, the current supercar, all of which were sold out before the car was even announced. Reasonable estimates put the F80 average selling price at about $4 million, and they're making 799 of them. That is $3.2 billion of Ferraris in 799 examples. Assume a 10% retail margin to dealers, so about $2.9 billion of revenue to Ferrari, spread over roughly two and a half years, meaning give or take $1.25 billion in the first twelve months, about 15% of revenues for the year, from one car. But that is not the whole story. Ferrari has disclosed that the Icona and supercar models have higher margins than the rest of the line, and there are credible estimates of 80% to 90% gross margins on the supercar.

David Rosenthal

This is intuitive. When Ferrari throws an extra $10,000 of something nice into the supercar, they mark it up a lot more, because those buyers are wildly price-insensitive.

Ben Gilbert

So it is not crazy to assume that while that car contributes 15% of revenues in its first twelve months, it is more like 30% of Ferrari's annual profits, possibly higher, from that one supercar in its first year. The business is in the supercars. It is funny to think: the Ferraris you occasionally see driving around are just peanuts for the business; it is really all about the ones locked away in garages.

David Rosenthal

Where I imagine you were going with the Icona: wouldn't it be nice to have another series with not-quite-as-good dynamics but pretty good dynamics, still expensive and desirable, with close to as good margins, to smooth out the pesky seasonality of only having a supercar once a decade? That is what they backed into with the Icona.

Ben Gilbert

The other thing to know: most car companies have very few models and run them a long time. On our Rolex episode you heard about the Submariner from 1965 and the Submariner today, one continuous evolving line. Ferrari is the exact opposite. Over the next five years they intend to launch four new models per year on average, twenty new model names in four years, and they discontinue models quickly, every four to five years, to enforce that each is unique and exclusive. Why doesn't everyone do that? Most have to invest hugely upfront in tooling. Ferrari doesn't, because their nimble manufacturing lets them bespokely spin up a brand-new car. Super-boutique hypercar companies like Pagani or Koenigsegg don't have Ferrari's tooling and manufacturing prowess, so they can only make a model once a decade. The impressive thing is the cars are just different enough to deserve different names, but a lot of the R&D and components carry over; you can see the manufacturing learnings.

Ben Gilbert

On dealerships. In the past they worked like the traditional model, where dealers had clients and allocated cars. Now allocation is done centrally by Ferrari, and dealerships serve more as distribution, operations, and service. I think of it less as a dealer network and more as franchised service and delivery infrastructure, with Ferrari owning the customer relationship. Ferrari now centrally controls the waiting list.

David Rosenthal

Dealers play a huge role in the secondary market, though, and Ferrari knows a thriving secondary market is in its interest, since given how few new cars there are, the entry-level Ferrari is really a used Ferrari, the way to cultivate the next generation of owners. So they incentivise dealers by giving them 100% of the economics on a secondary-market transaction. And the secondary market is enormous. Over 90% of all Ferraris ever made, going back to 1947 and the 166, are still on the road. Nobody scraps a Ferrari. An ordinary car depreciates to zero because it will eventually be scrapped; Ferraris only go off the road in a terrible crash. There have been about 330,000 Ferraris ever made, and almost 300,000 are still drivable and on the road.

David Rosenthal

If you're Ferrari, it would be nice to participate in this secondary market in a tertiary way. Say you buy a used Ferrari or get yours ready for sale. It would be nice to have a certificate from Ferrari confirming every part is genuine. There is a programme called Ferrari Classiche, and for $6,000 to $10,000 you can get it looked over and certified. Ferrari is militant about the bar: it has to be truly original with official Ferrari parts and specifications. Which means if you want it certified you may have to pay Ferrari or your dealer to restore it and return all parts to official Ferrari parts. And you only ever get it serviced at a Ferrari-authorised service centre.

Ben Gilbert

If you're a Ferrari owner, you intend to sell it at some point, or pass it on, and you want it to be an appreciating asset. So you get it maintained with meticulous records from Ferrari service centres. It is a nice closed ecosystem they've created.

Ben Gilbert

So why do they do all of this: four new models a year, rapid discontinuation, clubs, events, track days, Classiche, a tracked secondary market? Our friend Brian Lum from Baillie Gifford had a great mental model. If you're going to create a brand the whole world lusts after durably, you need a lot of infrastructure for fans to engage with, to hang their fandom on. You need ever-more-rare models so every owner and future owner has a place to go. In luxury, you never want a customer to feel they've done it all; you want a place to graduate to. Maybe a second Ferrari, or going from your first used Ferrari to your first new one, or getting invited to buy an Icona. A lot of brands that want to be like Ferrari don't make the investments to have that infrastructure. The illusion is that you just ship very few units and have simplicity, but the opposite is true.

David Rosenthal

This creates the Ferrari pyramid. There always needs to be a place to graduate up to, and there is a whole forest around the pyramid of events and community. It is very impressive and very high-cost to operate day to day. Most product companies make a product, ship it, and have some servicing; operating the forest and pyramid and ecosystem that is the Ferrari universe is a high-cost everyday thing.

Ben Gilbert

And pyramid is a great analogy, because to grow it sustainably you grow in all dimensions. You widen the base and grow the height, adding the Icona and special series while expanding the base, so everyone has their place. You could argue the entire tifosi, all 400 million Ferrari sports fans, are the base you enter and graduate up from. And here is the most insane top-of-pyramid experience: the most extreme clients can buy a former F1 car, an actual car raced in prior seasons.

David Rosenthal

But you can't just drive an F1 car out of your garage. So Ferrari stores it for you in Maranello, like a library wine, and staffs it with an engineering team, mechanics, and an events team. They build programmes: do you want to come race at our private track on this day? We'll get your team ready, and if you want to race it elsewhere, we'll fly the whole team and the car there. The investment to staff that full infrastructure is astounding. And that has always been the core of what Ferrari is, going back to 1947: three things under one roof, a world-class racing team, a world-class racing-car construction and heritage company, and the suite of services and people to operate that, available for hire to private clients. No other car company has that.

Ben Gilbert

And most traditional car companies can't do this; their scale prevents them. They can't have only limited-edition cars and a super-wide range rebooted every couple of years, so they're missing an important piece of the pyramid. The thing that makes you successful at scale prevents you from executing Ferrari's strategy.

Ben Gilbert

There is one car we haven't talked about, which doesn't exist yet as of recording. We are six weeks from the unveil of the Ferrari Elettrica.

David Rosenthal

Ferrari's first electric vehicle, designed in collaboration with LoveFrom, Jony Ive and Marc Newson, in San Francisco. They unveiled it in a very unique way, clearly targeting a different demographic. They unveiled just the internals, the buttons and dials and tactile feel, and the steering wheel, at the top of the Transamerica Pyramid in San Francisco. They have not revealed the outside of the car. They wanted the tip of the spear to be: look at what Sir Jony Ive would make with his hands in a workshop twenty years after designing the iPhone. It is the exact opposite of the previous universe, which was show the body, show the shape, appeal to the motorheads, talk about the engine. Here we are talking about the buttons and the clickiness of the buttons.

Ben Gilbert

This was incredibly daring, because so many longtime clients, the hardcore collectors, the petrolheads who love the old-school small-displacement V12s and worship at the altar of Enzo, this is anathema to them. So let's do a bull-bear analysis. Is the job to be done by an electric vehicle compatible in any way with why people buy Ferraris?

David Rosenthal

There is essentially zero interest in electric supercars. When Ferrari and others started preparing about ten years ago, everyone thought new internal-combustion cars would soon be banned, at least in Europe, with EU regulations phasing them out by 2030 or 2035. But Ferrari built a whole new factory, the E-building, and is going ahead with the launch. Lamborghini actually cancelled theirs and switched to a plug-in hybrid.

Ben Gilbert

Much like the quartz crisis in watches, speed is no longer relevant. The F80 goes 0 to 60 in 2.2 seconds, and the Tesla Model S Plaid does it in 1.99. So the reason people buy Ferraris, like watches, has shifted to expressing yourself and having a unique driving experience. Electric cars are incongruent with the reason you buy a Ferrari, unless Ferrari can do something really cool and unique, which is clearly what they're trying to do.

Ben Gilbert

The bull case: we haven't seen the outside, but the internal components have been awesome. Ferrari could be expanding their audience. I don't think it's a layer in the pyramid; I think it's a new pyramid, appealing to people who'd have no interest in a traditional Ferrari, like me. I have no interest in owning a traditional Ferrari, but depending what this looks like, I could be very interested. That is the daring element: they're creating something that has to exist in a parallel universe to their core client base.

David Rosenthal

Here is one cool thing: it is quad-motor, one on each wheel, plus additional motors on each wheel that independently do steering and suspension. Apparently the effect is that it takes a super-heavy battery-powered car and makes it feel lightweight and balanced. There are almost illusions they can do with technology to make it feel different from every other electric car. For a company that stimulates emotion and passion and provides a unique experience, they may have figured out how to do that in an electric car, so we might look at other EVs and say they're fast, but they just don't feel the way this car feels.

Ben Gilbert

Ferrari by the numbers today. Last year they delivered 13,640 cars; 330,000 cars have ever been produced. My favourite framing of that stat, true until this year: Porsche delivers more cars each year than Ferrari has ever. For all the hand-wringing about increased production, Ferrari is still in a class of its own. Last year approximately 81% of new Ferraris were sold to existing clients, and 48% were purchased by customers who already owned multiple Ferraris.

David Rosenthal

Most Ferraris sit in garages among many other Ferraris, and occasionally some are driven on racetracks. So, hilariously for a company all about the driving experience, Ferraris mostly are not driven. I'd bet they have the lowest hours of use per car of any manufacturer producing at least, say, 5,000 cars a year.

Ben Gilbert

Which makes it an interesting luxury good, because there is no way to subtly show off that you have a Ferrari. It is either silent, sitting in your garage while you wonder how to bring it up, or, if you show up in it, really loud. There is no quiet luxury in the universe of Ferrari.

David Rosenthal

I think there is more nuance. Car-collector and Ferrari-collector culture, at least with the older generation, is very different from Hermès collectors. There is a real nerdiness and a real community. Cars-and-coffee meetups are a real thing; you go and connect with people, and they accept anybody. It is a way for adult males to make friends. So there is another way to show off your Ferraris, as part of a community where you celebrate them together, and it is very welcoming even if you don't own any. It is different from the watch world, where 'what watch are you wearing?' can carry a little ick, sounding like 'how expensive is your watch?' Car culture doesn't feel like that.

Ben Gilbert

It is paradoxical: these are the most expensive luxury objects, way more than a watch and far rarer, yet somehow less exclusive in the community aspect. The other point: Ferraris are loud and designed to convey passion, but traditionally they weren't flashy the way a Lamborghini is. If you want to be a crypto bro, you buy a Lamborghini.

David Rosenthal

Lamborghinis are the most garish side of Ferrari, minus the racing heritage. Plenty of Ferraris can be garish, but there is a legitimate history and culture you're buying into, and many models are quite restrained in styling. The last point: Ferrari has taken price up a lot recently, which has also stimulated the second-hand market. I spoke to someone who bought a car in the mid-90s from the bottom of the range and lamented selling it three or four years ago, because it has doubled in price since. That phenomenon has happened all over the Ferrari universe, which adds to the mild ick of seeing one, which you didn't used to experience as much.

Ben Gilbert

Back to the numbers. They did $8.2 billion in revenue in 2025, and $3.2 billion in EBITDA, a 38.8% EBITDA margin. Pretty good for a car company.

David Rosenthal

It is not a car company. That is the answer.

Ben Gilbert

So how are they so profitable? Look at their cost to make each car versus what they sell it for, and start with other car companies' gross margins. Ford, 7%. That is gross margin, before overhead, R&D, and G&A, when they make one car. GM 10%, BMW 14%, Volkswagen 14%, Mercedes-Benz 16 to 22%, Porsche 15 to 25%, Toyota 18 to 21%. Toyota is exceptionally well-run, generating roughly three times the gross margin per car as Ford. Ferrari is 50% gross margins. That is a luxury brand. And that is the average; the supercars and Iconas are way above 50%. The range is maybe 30 to 35%, and the supercars are in the 80 to 90% range.

Ben Gilbert

Worth pointing out: you might say Ferrari is a luxury brand, which is my assertion, but they do have to make complex, expensive hunks of metal, engineer safety, and truly innovate. When you look at companies that don't have to do that, LVMH is 66% gross margin and Hermès 71%. So there exists a category, just selling handbags, where you don't have to do the hard engineering. This is where Ferrari's technology element comes in that doesn't apply to other luxury companies. Still, Ferrari sells its cars for twice what it costs to make, whereas if BMW spends $100 to make a car, they sell it for $115.

Ben Gilbert

More interesting than the gross-profit percentage is the absolute dollars. The average profit per car exceeded $170,000, more than the entire retail price of your average luxury sedan. Even Porsche would need to sell six cars to equal the profit dollars from a single average Ferrari. What other company has a per-unit gross-margin contribution of $170,000?

David Rosenthal

This gets back to how we opened. In terms of how people spend money in life, it is housing, food, and transportation. If you're selling in the transportation category, one of the largest possible spends, and selling the most expensive version, you've spiked. Real estate is the only other thing you could meaningfully compare it to.

Ben Gilbert

A little segment breakdown. They report three segments. Cars and spare parts is 84% of revenue. Then 11 to 12% is sponsorship, commercial, and brand, which includes the lifestyle and fashion stuff, but the interesting bit is sponsorship, the Formula 1 team. Formula 1 is a profit centre that is also the single best marketing dollars they could ever spend.

David Rosenthal

Thank you, Liberty Media, and their stewardship of Formula 1. Over the last ten years, F1 went from just a marketing spend for Ferrari to the best marketing activity they do and a real profit centre. The HP deal alone, the title sponsor of the team, is rumoured to be $100 million a year. And in the latest Forbes valuations of F1 teams, Ferrari is the most valuable at about $6.5 billion. They don't produce the most profit, but they're the most valuable team because they're Ferrari, and everyone pays a premium for Ferrari. That is probably close to 10% of the current market cap, just the value of the team. And you can't extricate one from the other. Ferrari is Formula 1, and Formula 1 is Ferrari.

Ben Gilbert

Lastly, 4.5% of revenue is financial services and other, including selling engines to other Formula 1 teams, like the money the Cadillac team pays Ferrari to put an engine in their car.

Ben Gilbert

On multiples, for non-investors, this is how many years of the current business you'd have to pay to buy the whole company. We'll look at price-to-earnings. Ferrari trades at about 35 times earnings. Until the recent luxury slump that hit LVMH and Hermès too, it was around 50 times for a few years. For reference, most automakers trade at 8 to 10 times, Hermès trades at 35 to 60 times, and LVMH around 25 times. So the market agrees with management that this is a luxury company, not a car company, and one of the very best, an apex luxury company valued on par with the two best luxury brands in the world.

David Rosenthal

The implication of a very high P/E is that investors believe the profit streams are far more durable and certain than traditional automakers'. The other reason for a high P/E is expected growth, but that is super-duper not what is happening here.

Ben Gilbert

Revenue growth is actually experiencing a massive slowdown. If there is a bear case at all, it is that Ferrari has reached the edge of their extreme pricing power at the number of units they sell. Management said at their October 2025 investor day that the era of double-digit revenue growth is over, and over the next five years they expect revenue to grow just 5% a year.

David Rosenthal

For the long term that is probably healthy; they've expanded the pyramid so much that a period of slower growth is the right thing to do in luxury-strategy terms. But the stock took a hit after that investor day. It's funny: it took a hit and people still think the revenue streams are so durable they'll pay the next 35 years of profits to buy the business today. The market cap went from $90 billion to $55 billion; investors got excited about 11% and 17% growth rates and are now hearing 5%, hence the contraction, but a contraction to 35 times earnings.

Ben Gilbert

One more thing: China. What is going on in the auto industry in China is the place to start. China's car market is being completely upended by inexpensive, high-quality domestic EVs from BYD, Xiaomi, and others, which has hit brands that expanded into China, as we discussed on our Porsche episode. But China is only 7% of Ferrari's sales, down from 10% at its peak. Porsche, on the other hand, was 33% of deliveries a few years ago, collapsing to 15% and still falling. So the question is whether Ferrari is any less desirable in China than five years ago, and whether it fills a different enough job to be done than domestic supercars to weather the storm.

David Rosenthal

There are domestic supercars in China, but they're still not Ferrari level in desirability, and certainly not in brand heritage; they don't have the myth. Unless there is a sentiment change where people only want domestic supercars, the signal you send when you buy a Ferrari is not really at risk. The job to be done by an EV is completely different from the job of owning a Ferrari. And this is why the Elettrica is bold and important. It is easy from the US to think they should just stay with combustion engines, but in China, and in Europe where Chinese EVs are everywhere, the future is clearly shifting. So is Ferrari going to abdicate all of that and let the next supercar brands be built around EVs, probably in China, or step up and take their own swing?

David Rosenthal

Let's do our seven powers, borrowed from Hamilton Helmer's framework: what gives a company a durable, sustainable comparative profit advantage over its nearest competitors? The seven are scale economies, network economies, counter-positioning, switching cost, branding, cornered resource, and process power.

Ben Gilbert

Let's start with brand. How much would you pay for a Ferrari that was badged as a Ford?

David Rosenthal

There is a good data point: the Ford GT, whose MSRP I suspect was less than a Ferrari's.

Ben Gilbert

This is hard, because a Roma is not much more expensive than the highest-end Corvette, but an F80 is $5 million, and normal car companies have nothing that approaches that. So who is their direct competitor? Probably Lamborghini, which makes about 11,000 cars a year to Ferrari's 14,000. At the IPO year the average selling prices were about even, roughly $300,000 for either. Today Ferrari's is $500,000 and Lamborghini's about $340,000. So Ferrari has flexed its pricing power, especially as Lamborghini made more and more to catch up on volume. For our powers exercise: how much more would you pay for a Ferrari than a Lamborghini? About a third more.

Ben Gilbert

On the one hand, brand is of course the strongest power Ferrari has, as with any luxury company. On the other hand, I think it's not quite as powerful in driving profit margins as it is for LVMH or Hermès, because a Ferrari car is really differentiated.

David Rosenthal

It still has to be a Ferrari. Ferrari can't just stamp the prancing horse on a car and call it a Ferrari. It has to elicit emotion, be cutting-edge and incredibly powerful. There is a phrase they use, racing thrills, engineered over decades to provide a very specific thrill you can't get by throwing another badge on. Management would insist this is a fruitless discussion, because it is intellectually impossible to rebadge something and call it a Ferrari. But in reality, when they raise prices, people pay, because there is a shared myth, a belief in what the brand represents, that is quantifiable and worth something.

Ben Gilbert

How does this compare to how you felt about watches at the end of the Rolex episode?

David Rosenthal

Watches don't provide racing emotions. At the high end, all the performance is effectively identical, so what matters is who you are saying you are to the world when you look at your wrist, and when someone else sees it. A watch says something about you, but it doesn't provide an experience for you. There is a perfect comparison: Porsche is Rolex. They make a crap-ton of them, Rolex about a million a year and Porsche around 320,000, and both are incredible brands. I could easily see buying a Porsche; it feels reasonably me. Could I see buying a Patek Philippe? Not really, the same way I say not really about Ferrari. If Porsche is Rolex, then Ferrari is Patek Philippe: much smaller production, an order of magnitude more expensive, the difference being that Ferrari is flashier than Patek and has the tifosi.

Ben Gilbert

So branding shows up more in luxury watches than in luxury cars, because of the lack of experienceable intrinsic product characteristics. It's hard to experience the product in a watch, but easy to experience the differences in a car, so you rely more on brand in watches.

Ben Gilbert

Keeping the Porsche comparison, Ferrari has an interesting sweet spot of scale economies I don't think we've seen before. They can do things Pagani can't, but also things Toyota can't. They're like Goldilocks, just right, big enough but not too big, small enough but not too small.

David Rosenthal

If they were any bigger, they'd be handcuffed by overhead; any smaller, and they couldn't do the innovations and design all the programmes. There is also a scale economy to the community: the racing programmes, meetups, and factory tours require a certain scale to support.

David Rosenthal

And Ferrari absolutely has network economies, with the tifosi and the community being so open, a way for older men to make friends. Whether you're a member of the tifosi or a Ferrarista, a big part of what you're doing is making friends. A rich community around your product is almost free defensibility, because there is so much more predisposition to want to buy something with a Ferrari logo. Ferrari is the most popular F1 team in the world by a large margin, and hasn't won much since Schumacher, and sells cars the vast majority of its fans will never be able to buy. I bet a lot of Mercedes racing-team fans can find a way to buy a Mercedes; almost none of Ferrari's fans can buy a Ferrari.

Ben Gilbert

You just pulled forward my quintessence, so I'll do it now. Ferrari is both inclusive and exclusive. It has the exclusivity of a luxury brand but the inclusivity of a sports team. It is an amazing marriage, and this is going to sound self-serving, but I was nodding reading their financials, because this is exactly the Acquired strategy: we're unbelievably exclusive about the companies we do deep dives on and about our sponsors, and yet as inclusive as possible for the community.

David Rosenthal

We've always talked about it as Costco in the front and Hermès in the back. But really, Ferrari figured it out first. If you can marry a luxury brand with a sports team, it is a business cheat code.

Ben Gilbert

Back to powers quickly. We did scale economies, network economies, and branding. Counter-positioning: did it ever exist here? It almost never exists when you're an incumbent.

David Rosenthal

I don't really think so in the takeoff phase. They were just doing something different, having the team, the constructor, and the services all in one house. Though they are counter-positioned against the houses of brands today: they can do things Lamborghini can't because of the platform sharing. Switching costs, none; most Ferrari owners own other cars and want to keep adding. Cornered resource, absolutely: Enzo and the history and the myth, which isn't going anywhere, and for a while their F1 team had an advantage because they have their own racetrack and wind tunnel that no one else has.

Ben Gilbert

Process power?

David Rosenthal

I don't think they have any obvious process power. There is institutional knowledge in the factories and a very unique way of building cars, but I don't think that's quite process power. Their power lies mostly in the other categories. So the question becomes: what is the primary reason imitators have failed to execute Ferrari's strategy as well as Ferrari? The obvious ones are McLaren, trying to do the same thing, Lamborghini, Aston Martin, and Bugatti at much smaller scale. Why are there no other Ferraris?

David Rosenthal

My answer is continuity. Through all the crazy ups and downs, Ferrari has always been Ferrari. The core myth has always remained intact, and the products, up and down as they've been, have more or less always delivered on what you're buying. That has been unbroken back to 1947. They're the only F1 team continuously operating for all of F1.

Ben Gilbert

Largely correct. For all the people who complain that a model was crappy or a strategy was bad, it is a narrow window where they were still more or less being Ferrari. Compared to the ups and downs of any other car company, it is quite continuous.

David Rosenthal

And my answer differs for each competitor. Lamborghini: how do you build a company like this without racing heritage to tie it to? To build a luxury brand you need time and heritage, tied to an emotional thing people lust to connect over, and in cars that is racing. Aston Martin fell down because they've been terrible at running a business. McLaren had various changes in ownership, leadership, and strategy. Different reasons, but no one over 80 years has been able to run the Ferrari playbook.

David Rosenthal

For my quintessence, I took the question we posed at the start: what are you buying when you buy a Ferrari? Two things. One, passion, undeniably, quintessentially Italian, Enzo-and-Ferrari passion in every car, from the range to the Icona series to the supercars, and probably even the Purosangue. As the CEO Benedetto Vigna told me yesterday, 'We don't sell a car, we sell a dream.' It's an old legal line, but it's true. Compare that to most cars, which have zero passion. And two, the ability to feel maximally alive in a Ferrari, which comes right back to Enzo and all the tragedy and death. You are buying a weapon you can use to fight against death and scream into the void, should you so choose.

Ben Gilbert

The one thing I'll add: back on the Rolex episode we talked about a functional alibi, a reason you can claim you need such a thing. Ferrari has lots of incredible alibis. Most people don't experience feeling maximally alive going right up to the edge, but that is one of several plausible alibis for why you can convince yourself to buy it. For me it's the incredible engineering; for some it's the racing heritage; for others the cool manufacturing and craftsmanship. These are tremendous assets and extremely plausible alibis, even if what you're really doing is social signalling, or you have too much money and don't know what to do with it, or you view it as an investment.

David Rosenthal

That is a great place to leave the story.

Ben Gilbert

A couple of bits of trivia. First, the actual Lamborghini story. The way this is out in the world comes from an issue of Thoroughbred and Classic Cars from January 1991, a quote from Ferruccio Lamborghini in a print-only magazine, which is the origin of the founding myth of Lamborghini.

David Rosenthal

The legend is that Ferruccio Lamborghini was a wealthy Italian tractor manufacturer dissatisfied with the clutch in his Ferrari, and went to Enzo to complain. The quote: 'The problem with the clutch was never cured, so I decided to talk to Enzo Ferrari. I had to wait for him a very long time. "Ferrari, your cars are rubbish," I complained. Il Commendatore was furious. "Lamborghini, you may be able to drive a tractor, but you will never be able to handle a Ferrari properly." This was the point where I finally decided to make a perfect car.'

Ben Gilbert

The reality is that was intentional myth-building on Ferruccio's part; it never happened. The real story is that one of his tractor mechanics, repairing one of Ferruccio's Ferraris, found some of the parts were quite similar to the parts they used in the tractors, and said, we could try making cars too, I bet we can be at least as good as this Enzo guy.

David Rosenthal

Everyone involved is long dead. Could be some of column A and some of column B. But that is the legend of the founding of Lamborghini.

Ben Gilbert

My last one. The 1949 Le Mans that Chinetti won, the first major victory for Ferrari, the private-client car winning Le Mans. There was another privately owned Ferrari 166 entered by another Ferrari client in that very same 1949 race. Do you know who that client was? European, French. It was Pierre-Louis Dreyfus, of the famous Dreyfus family. And Pierre-Louis Dreyfus's granddaughter is Julia Louis-Dreyfus, Elaine from Seinfeld. Her grandfather was one of the first Ferrari clients and raced at Le Mans.

David Rosenthal

That is so crazy: she is of the Louis-Dreyfus family, multi-billion-dollar European generational wealth, and went on to be an incredibly successful, self-made actress. A crazy smashing-together of two worlds.

David Rosenthal

A huge thank-you to Luca Dal Monte, who authored the definitive biography of Enzo Ferrari and spent many hours talking through this history, and to the other Luca, Luca di Montezemolo, who embodies Ferrari as much as anyone alive today. Thanks also to Domenico De Sole, former CEO of Gucci, who helped us understand the difference between French and Italian luxury, to Arvind Navaratnam at Worldly Partners, to Brian Lum at Baillie Gifford, who woke me up to the idea of the pyramid of infrastructure, and to Benedetto Vigna, the CEO of Ferrari today. If you liked this episode, go check out our episodes on Porsche, Rolex, Hermès, and LVMH. We'll see you next time.