Luca Cordero di Montezemolo transformed Ferrari by implementing a luxury strategy—cutting production, creating waitlists, establishing presentation ceremonies, and building a pyramid of exclusivity—turning Ferrari from a racing-focused car company into an apex luxury brand.

199:07Toyota that same kind of range 18 to 21%. Toyota is exceptionally well-run. Isn't that amazing that Toyota generates on the order of three times as much gross margin per car that rolls off the line compared to Ford? >> Yeah, that is incredible. >> Ferrari is 50% gross margins. That is a luxury brand. >> And as you were pointing out earlier, that's average. >> Yes, >> the supercars and the Icona cars are way

199:37above 50% gross margins. I get the sense the range is like 30ish% maybe 35% and then the supercars are in the 80 to 90% gross margin range. >> So it is worth pointing out here this average 50% gross margin you might say oh it's a luxury brand which is the assertion I'm making. They do have to make a bunch of complex expensive giant hunks of metal and safety and engineer

200:03the absolute crap out of them and truly innovate. So when you look at companies that don't have to do that, LVMH is 66% and Hermes is 71%. So I mean there exists a category when you don't have to do all of that hard engineering work where you know it's a it's a good business just selling handbags. >> Yep. Yep. And this is where the technology element of Ferrari comes in

200:30that doesn't apply to many of the other luxury companies. >> Yep. But still, Ferrari is able to sell their cars for twice what it costs them to make. Whereas, if BMW spent a hundred bucks to make a car, they only get to sell it for $115. So, perhaps more interesting though than all of this than the gross profit percent is the gross profit absolute dollars. The profit per

200:52car average exceeded $170,000. That is more than the entire retail price of your average luxury sedan. And even Porsche would need to sell six cars to equal the profit dollars that come from a single average Ferrari. Wow. That is truly astonishing. >> There's so many different ways to slice this. It's fun. >> God. I mean, what other company or products can you think of that has a per

201:24unit gross margin contribution of $170,000? >> Well, this gets into how we open the episode that in terms of how people spend money in life, it's housing, food, and transportation. And if you are selling them something in the transportation category, like one of their largest possible spends, and you're selling them the most expensive version of it, you've sort of spiked. Like you you kind of have to it's like

201:47real estate is the only other thing you could really meaningfully start to compare this to. >> Yep. >> All right. A little segment breakdown time. They've got three segments that they report. There's cars and spare parts. That's 84% of their revenue. 11 12% though is sponsorship, commercial, and brand. >> The Formula 1 team. >> Yeah, I was going to say the the commercial and brand. This is sort of

202:08where their their lifestyle stuff is, the the fashion. But really the interesting bit here is sponsorship. Formula 1 for them is a profit generating center that is also the single best marketing dollars they could ever spend. >> Yes. Thank you Liberty Media and their stewardship of Formula 1. Like overnight in the last 10 years, Formula 1 went from just a marketing spend for Ferrari to the best marketing activity they do