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Tesla and Ferrari Competes in the Market

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Posted: October 22, 2015 at 11:36 am   /   by   /   comments (0)

The first day of Ferrari NV (NYSE:RACE) as a public company started out right. Their shares went up to 5.77%, closing at $55 per share; thereby giving the company $10.39 million for market capitalization. What would Ferrari’s IPO mean for Tesla Motors Inc (NASDAQ:TSLA)?

Tesla and Ferrari

Tesla Motors Inc is a competition to Ferrari as they sell the same types of vehicles; their vehicles have similar key features. For one, both of the companies manufacture vehicles at premium prices. Their production is also demand-limited; Ferrari actually limits their yearly sales to about 7,000 to 7,255 vehicles in order to preserve exclusivity; meanwhile, Tesla Motors have manufactured between 50,000 to 55,000 vehicles this year primarily because they are still new on the market. Another similarity of these two companies is that they are established by visionaries.

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A Tesla Roadster on public display at a Japan-based showroom.

The Differences between Tesla and Ferrari

Like any other competing companies, there are differences between Ferrari and Tesla. It is not a secret that Ferrari is much more recognized compared to Tesla; hence, the previous is more profitable than the latter. According to SEC filings, Ferrari earned about $300 million in profits in 2014, while Tesla Motors isn’t expected to be GAAP profitable until year 2020. Because Tesla isn’t that profitable, it isn’t worth as much compared to Ferrari when we talk about valuation metrics.

Ferrari trades on the Stock Market

Ferrari started to trade on the NY Stock Exchange under the RACE ticker.

Sergio Marchionne, the Chairman of Ferrari, believes that wealthy people are potential customers for the many Ferraris that their company is manufacturing in the future. He even thins that wealthy potential customers are buying the wrong cars nowadays.

“They’re buying cars that are not at par with a Ferrari,” says Marchionne.

When asked about their competition, Tesla, he said, “I’m not going to make derogatory remarks about the competition, but if you have to wait over 12 months to get a car, people have a tendency in some cases to go someplace else.”

Tesla is taking deposits for their Model S and Model X cars; however, they have an issue of not delivering these vehicles on time.

But the demand for Tesla cars doesn’t seem to be affected by this issue. In fact, Elon Musk’s electric car startups believe the company will be taking all of 2016 to fulfill the orders for the Model X SUV.

Tesla’s shares, on the other hand, were slightly down on Tuesday to $212 as their annual survey shows consumers report reliability issues.