As Ferrari celebrates the 70th anniversary of the “Prancing Horse”, Luxuo was among the selected media invited to Ferrari Singapore’s corporate headquarters to talk to Dieter Knechtel, CEO of Ferrari Far East Hub to discuss the challenges of growing a luxury business amidst soft global markets, catering to the affluent and the overall direction of the world’s market leader of high performance sports cars.
Ferrari recently launched the 70 years anniversary tailor-made project at the motor-show last year where designers of Centro Stile have put a modern twist on the stylistic features and elements that distinguished 70 of the most beautiful Ferraris in history and in so doing have created 70 unique “design”. 350 cars were proposed in total, that is to say 70 different liveries x 5 models. Seventy exclusive liveries, each created just the once for every car in the current range, blend the past with the future to create the icons of tomorrow. The inspiration comes from extraordinary models such as the 375 MM Pinin Farina Berlinetta that Roberto Rossellini ordered for Ingrid Bergman.
According to Knechtel, his colleagues were skeptical that they could find the customers to buy those cars but in the end, they were surprised that the cars were sold out during the summer of 2016, between the end of June and the middle of August. Such is the fervour for Ferrari sports cars that Luxuo was dying to uncover how the Prancing Pony is little impacted by the slow down as the rest of the luxury industry.
Jonathan Ho for Luxuo: It’s always interesting to talk to C-suite executives when markets are a little uncertain, almost everyone has an unique perspective on the situation.
Dieter Knechtel, CEO Ferrari Far East Hub: We are a little bit different in that Ferrari can operate in pretty much any economic environment. Based on some marketing studies which project till 2025, I can tell you that the number of wealthy people are still growing.
People say that the Singapore economy is flat and slowing with GDP growth hovering around 1.9% but that is normal for a developed economy. Yet, the number of high net worth individuals will continue to grow over the next 10 years and this is a development which won’t stop. This is where we see the potential.
What about in context with the rest of East Asia?
We see this growing affluence in Asean but really we see this everywhere even in Japan and Australia. Philippines and Vietnam is going strong, Thailand is softer at the moment but Ferrari is not dependent on GDP growth per se but rather the potential size of the segment. For example, in Thailand we have 340% luxury tax but its the market where we sell the most cars in Asean so we do not depend on GDP or tax factors but really on how we work with our partners and distributors and how solid the processes are implemented, how they are representing the brand which makes more of an impact than the environment because our products are highly attractive.
There’s a consistency in what we do and there’s a value in staying true all the time and the clients can see it. From the product point of view we have everything we need and now it’s up to how we do the work. The key point is that there are many potential customers; and some high net worth individuals have never considered why they might need a sports car and we have to develop this desire. This desire is usually cultivated with dynamic presentation of the car – touch, feel and personalised effort with someone who had never previously thought about buying one. We have many customers visiting Marenello for an unrelated reason but after we take them to the track to experience a car, they always end up wanting one.
Let’s start off with something which hangs over the head of every car enthusiast in Singapore. A while ago, Hong Seh Motors, former Singapore distributors for Maserati had a letter which went viral on social media. In it, they posited that government taxes like COE, ARF, GST, CEV, etc, essentially triples the cost on a $100k Ghibli. Citing rental and difficult markets, they have elected to relinquish distributorship, do you feel your partner Ital Auto feels similar pressures?
This is the same situation for Ferrari, they cost three times here than they do for Europe. €230,000 times three becomes €690,000 here and plus options, it’s almost close to a million euros and I think this is something we have to live with and have proven that we can live with.
We have been growing for the last 20 years even when they introduced higher and higher taxes. It is still possible to do business here at a reasonable level and Ital Auto is a very strong partner and have been doing a very good job over the past years.
They dare step into Maserati in SIngapore because they know what they are doing and they can see the potential plus, they have a lot of experience with the brand as the biggest dealer for Maserati in the world through Shanghai. They know the game, understand the context, I don’t see any worry or pressure, it’s about doing a good job and being of service to the customer, it’s not about selling more cars, it’s important to sell cars but it is more important to do the right thing with the brand.
When you say doing a good job for the customer, does this imply that Ferrari being arguably a more recognisable marquee that you don’t really need to work on the branding anymore because all you need is to properly service the customers that walk in based on sheer demand?
We still have to work on the branding even though it’s very well recognised and reputable. We don’t do any advertisements and we use racing and Formula 1 as our communications platform. Though We don’t need to build up the brand anymore, we need to over-fulfil our brand promise.
When it comes to Ferrari, this brand experience is very much related to the ownership experience: It’s about driving and the experience of the car while doing it in a community of like-minded people. This is why, we organise track days and tours in Italy with road tours in different countries, we can organise almost any experience with the car- What we offer to our customers is often a “money can’t buy” experience.
Between the clients, there’s a lot of communication because there’s mutual understanding of successful, globally minded, life-loving, taste-masters. I think this sort of ownership experience is a big part of our job. Singapore Ferrari owners-club is a great community.
When it comes to reaching out to new prospects, we have to execute a different sort of effort and that means finding possibilities to excite prospects with our products and letting them experience how great it is to drive a Ferrari. Sometimes the mindset just isn’t there yet because it’s a high tech fast car, we have address some concerns, notably that a high performance sports car might be difficult to drive or unsafe to use on a daily basis but once you drive a Ferrari you will begin to see how easy it is and how you are much in control of everything because all the technological systems support you. Additionally, we instruct them on how to handle it and it inspires a lot of people.
Do you feel this technology is double edged in that many car enthusiasts prefer that the onboard computer doesn’t handle so much of the driving experience?
At Ferrari, the computer essentially monitors speed and has algorithms to avoid risk or potential unsafe actions. Stability programs also allow for different levels of driving experience and that is selected through user selected toggles, adjusted for environment and driving style, so owners can have fun with the car. At the same time, passive safety is very important and we developed many things which contribute to safety of the passenger in extreme situations. Dynamic vehicle controls come with a corresponding improvements in safety so that everything can be safe for driver and passenger.
Correct me if I’m wrong but some Maseratis share a powertrain with Ferrari (in that they are built at the Ferrari factory in Marenello), does this arrangement with Ital Auto puts both brands on a collision course especially with joint history from before?
The V6 and V8 engine of Maserati are produced by Ferrari. We don’t have V6, that’s exclusive for Maserati, the V8 which Maserati uses is a variant of the one we use at Ferrari. There are modifications to the engine which changes the characteristics for Maserati, so while it may be the same basic product, it’s a different experience.
To put this in context, having sat in a Rolls Royce and in a Maybach, sometimes the luxury experience is too similar so now that Ital Auto will carry both Maserati and Ferrari, how will you differentiate yours?
I don’t think the experience is too similar. I believe that we have a totally different strategy. Maserati is going into volume while we are staying exclusive. A Ferrari is an unique experience and it’s a personal piece of art plus we are at a different price point and performance point of view, there’s a world of difference. We are not competing with Maserati at all.
Historically, Maseratis were marketed alongside Ferraris in the network, in China, it’s basically every dealer. In Singapore, it’s going to be a mono-brand set up which means even the management teams and processes are different and quite likely the customers are different as well.
I guess what I really want to ask is that do you specially make Ferrari’s V8 engines sound vastly different?
Yes. [laughs] That’s the ultimate question! Every brand should have it’s own sound and at Ferrari we have ours. Every manufacture tries to produce the authentic sound of the brand.
Ferraris are designed to last but Singapore COE usually means we evaluate whether it is more worthwhile to get a new model every 10 years, is this something which you take into account when you have to determine what models Ferrari Singapore gets allocated?
We don’t determine allocation, we leave that totally to the markets and customer demands. We don’t have a specific strategy related to the 10 year expiry of a COE. What we are really concerned with is the market for pre-owned cars, it is my wish to take care of pre-owned Ferraris because I’d much rather keep it even the Ferrari official network and sell it again. This is great for pre-owned values but we also feel the responsibility for every car so the more we can take care off, the better.
When it comes to allocation, we produce cars made to order, we don’t produce cars on stock. Allocation depends on how many customers we find, if we find more, we allocate more. If we cannot allocate so quickly, the waitlists just become longer and then we balance allocation again.
[Editor’s note: Ferrari Singapore manages their own pre-owned division through Ital Auto from 2 years ago]
There’s no doubt that Ferraris are well engineered, with your Porsche background, do you feel Italian supercar manufacturers can learn something from the Germans?
[Laughs] I think both brands are very highly respected in the industry. I think both brands can learn from each other, one is watching the other in terms of systems and processes and I think this is very healthy situation which spurs competition for both brands.
Italian brands are full of emotions. German engineering is clinical but both brands are excellent players in the industry. We can learn from each other but neither Porsche nor Ferrari will leave its path of uniqueness and heritage. There’s a lot of transfer of technology from our Formula 1 team and there’s a lot of competence and technology for both cars.
As CEO of the Ferrari Far East Hub, do the markets differ very widely from one country to another?
In Asean, Thailand is good because of stability which sounds odd because the military is in power, but it’s exactly the reason so it’s a very welcoming environment for wealthy people to buy. Malaysia has suffered quite a bit because a primary resource issue with China, prices of palm oil have come down, other reasons are political – both markets have bottomed out and are coming up again. In Indonesia we have a very strong customer base. People with Ferraris usually buy tailor-made 12 cylinder limited editions. We don’t large numbers of Indonesian customers but each customer has an average of 3 Ferraris – A small crowd of very strong customers.
In your opinion, why does a brand like Aston Martin struggle even with the weight of James Bond behind it?
[Sighs] I think the point is that if you want to be successful all the time, you have to be consistent in what you do, that is what made Ferrari so strong because we have a system of product development and strategy we makes us strong while other brands struggle to put together something consistently.
This question is half serious: You mention that Indonesia is one of your strongest markets and Poltrona Frau has a relationship with Ferrari to do custom interiors, does this relationship exist because Indonesia has so many traffic jams that if you’re going to be stuck in a Ferrari, it should be a really comfortable one?
[Laughs] As far as I know, the Indonesian clientele appreciates the personal treatment in the whole process of deciding what to buy: from how they are received and how they are informed, they have the interest in having the best and then someone needs to inspire them about what is the best.
Tailor-Made is a time consuming business so there it comes down to personal effort. People who are willing to pay whatever to have the best, most unique piece of art, then they need to have a good consultant explaining to them what is possible and then bringing them to Marenello to see the different options. We have different levels of customisation and we have a good number of Indonesian clients working with the design department to create a unique car which will take 3 to 4 years to deliver. I don’t think traffic has so much to do with that but the culture.
I guess what surprised me was that when I reached out to the Singapore Poltrona Frau, distributor he expressed that there was very little interest in customising a car’s interior.
Singapore is a little bit compromised by the COE. I have yet to find out the real reasons but mostly it has something to do with the level of exploiting the level of possibilities. In Singapore, our customers have the sensation that when they buy a car, they have already spent a lot and they don’t want to over stretch it while in Indonesia, it doesn’t matter so much.
Is it a zero-sum game when it comes to competition with Lamborghini?
By experience, very few customers have both. That said, we believe the typical Ferrari customer is very different from a Lamborghini customer. Ferrari still has the strongest product which is confirmed by the fact that we are the clear market leader by far.
What about when it comes to Tesla?
No, I dont believe our customers are into electric cars.
Would Ferrari even consider looking into one?
Full electric, for sure no. But electrification is definitely coming in a form of a hybrid.
No full electric car because it is a brand philosophy?
It’s a brand philosophy and I don’t believe there is a market for us because our customers want a real Ferrari and we don’t foresee a true Ferrari being an electric car.
You don’t forsee an oil and gas free future?
We see some signs. I believe there are initiatives in France now to be free of gasoline engines An oil and gas free future might come but it will take a long time but I still think there’s some time to decide what we will do and what we have to do. We want to be loyal to our values and stick to our DNA.