Word that Fiat Chrysler Automobiles is spinning off Ferrari to make it an independent automaker pleased shareholders but has us a bit worried. Ferrari, part of the Fiat family since 1969, has been making amazing cars lately, and revenues are up. But the company's longstanding practice of strictly limiting production to favor exclusivity over volume may give way to shareholder demands for increased production---and revenue.
That's troubling, and not just because Ferrari---which built only 6,922 cars last year---always has had the mystique of the unattainable. An independent Ferrari cranking out more cars would suddenly find itself subjected to America's strict Corporate Average Fuel Economy standards, which place increasingly tough fuel efficiency requirements on automakers. If shareholders want Ferrari to grow, its cars will have to become significantly more fuel-efficient. Ferraris are beautiful. They are fast. They are nimble. And they are thirsty.
But don't despair. There are at least five ways Ferrari can meet, and perhaps even skirt, those regulations, and only one of them is reason to buy a Lamborghini instead.
Ferrari was led by its founder and patriarch Enzo Ferrari from its founding in 1947 until 1969, when Fiat acquired a 50 percent stake in 1969. That expanded to 85 percent in 2008, one year before Fiat saved Chrysler. Now Fiat Chrysler wants to spin off Ferrari with an IPO. The plan is to offer 10 percent of outstanding Ferrari shares to the public and reserve the rest for current Fiat Chrysler shareholders, including Piero Ferrari, Enzo’s only living son. If another company (VW? Geely?) or an exceedingly wealthy investor grabs most or all of that 10 percent stake, it will hold tremendous sway over how the business is run. “They’re not gonna be thinking about Ferrari heritage," says Karl Brauer, senior editor at Kelley Blue Book. "They’re gonna be thinking about profit.”
One way to increase profit is to increase sales by building more, and perhaps more varied, cars. Porsche offers an example of how an automaker can move beyond its niche to offer sedans and even SUVs. “That is a way to increase volume," Brauer says. "It also is a way to increase average fuel economy for a brand.” Auto industry insiders and snobs may snigger that Porsche has sold out, but with cars like the new Cayman and 918 Spyder, the brand has maintained its reputation for making great sports cars, along with family-friendly people movers.
An independent Ferrari building more than 10,000 cars would have to meet will have to meet CAFE standards on its own. The government standards, introduced in 1975, require the average fuel efficiency of all the cars an automaker sells, across its brands, to reach a certain number. If Volkswagen sells two Golfs that get 36 mpg and one Lamborghini Huracán that gets 16, its CAFE number is 30.
The standards are a bit of a rabbit hole, but at the moment, NHTSA includes Ferraris among all of the cars Fiat Chrysler imports to the US. So each Ferrari is included among the Maseratis and, more helpfully, the Fiat 500s, produced overseas. (Cars produced in Mexico and Canada are counted as domestic vehicles because of NAFTA). Yes, Fiat 500 sales have slipped this year, but Fiat still moves a few thousand each month, more than enough to outweigh thirsty Ferraris when the federal accountants come calling.
CAFE standards require automakers to achieve a fleet average of 34.1 mpg by 2016, and 54.5 mpg by 2025. Those numbers are not quite what they seem, however. In 2008, the EPA made its tests tougher, so most cars posted lower, but more accurate, fuel efficiency figures. The CAFE requirements are based on the old tests, and Edmunds estimates the 34.1 mpg figure works out to about 26 mpg according to the EPA's new test. By the same math, 54.5 mpg on the old test comes to 36 mpg on the new one. (We told you it's a rabbit hole.)
What all of this means is the goals are a little easier to hit.
Even so, Ferrari’s got a lot of work to do. Its most efficient car, the 2015 California T, goes just 18 miles on a gallon of premium gasoline. Its reigning supercar, the LaFerrari, gets 14 mph---and it's a hybrid. Nonetheless, these two cars represent two of the five paths Ferrari could take toward a future where it deals with CAFE standards, without giving up the performance or design that makes them so desirable.
The California T is powered by a twin-turbocharged V8 engine, the first turbo Maranello has offered in ages. Rumor has it this will be a trend for Ferrari, with a turbocharged 458 Italia coming soon. Ferrari could go a bit further, though, and offer a turbocharger on a smaller engine. Instead of a turbo V8, you might see a turbocharged four-cylinder engine. Although even the thought of this will make the tifosi spit espresso all over their screen, we've seen plenty of sports cars follow this path, including the new Audi TTS, the BMW Z4, and the Alfa Romeo 4C. The 2015 Mustang comes with a turbo four that creates 301 horsepower but gets 26 mpg. Still not convinced? Volvo's working on a triple-turbocharged four that reportedly makes 450 horsepower. Throw that kind of power and efficiency in something like a revived Ferrari Dino, and we’re onboard.
The LaFerrari’s electric motor is there for performance, not economy: It complements the 6.3-liter V12 and pushes total horsepower to 950. All-electric mode is capped at 3 mph, good for getting out of the garage but not much else. Ferrari should carry on with hybrids, but make some that are actually, you know, fuel efficient. That doesn’t mean giving up power. The BMW i8 plug-in electric hybrid goes 0 to 60 in 4.2 seconds and delivers the equivalent of 76 mpg. We bet Ferrari could make something even better, with similarly, umm, electric, styling. Each one sold would balance out a couple of 15 mpg V12s. And hey, why not make more efficient V12s, while you're at it? It seems crazy now, but the first Ferrari, the 1947 125S, had a V12 that displaced just 1.25 liters and produced 100 horsepower. The new owners would be wise to check their history books for inspiration.
There are three more routes Ferrari could take. It could just ignore the CAFE standards, pay the fines, and consider that a a cost of doing business---albeit a cost passed on to consumers. If buyers already are dropping $200,000, Ferrari can likely get away with tacking on a few grand. The dealer can explain it away with a shake of the head and a "è la politica".
The last option, the one no one wants to see, is a Ferrari version of the Aston Martin Cygnet. Don't remember the Cygnet? Not to worry. It's utterly forgettable. Three years ago, the venerable British brand introduced a rebadged Toyota iQ, a two-seat, three-door hatchback with performance perhaps best described as anemic.
The little car was billed as an urban runabout and meant to boost the average fuel efficiency of the Aston fleet. The trouble was, no one was duped into paying more than $40,000 for a Toyota with an Aston Martin logo and leather seats.
“That was a terrible thing,” Brauer says. “That’s the essence of what does mess a brand up.” Aston Martin canned the car last year, and the webpage that once encouraged customers to buy the Cygnet now reads, “Sorry, that page cannot be found.” If Ferrari decides to rebrand the Fiat 500 with the prancing horse on the hood, it might as well call it the Il Deathrattale.
This need for more fuel efficiency is, of course, predicated on the idea that Ferrari has to adhere to federal standards. But there's a loophole that’s good news for people who love the brand just the way it is, and offers a fifth option: Independent automakers that produce fewer than 10,000 cars annually can petition NHTSA for alternate CAFE standards based on what the automaker thinks is feasible. So if Ferrari, once divorced from Fiat, decides it doesn’t want to increase volumes, we can expect V12s to keep rolling out of Maranello. Bellissimo.
