It was strange to see another press release from Ducati Motor Holding about the 2020 sales year – you would think that the Italian brand would like to forget about the 9.7% sales drop it reported for last year.
Like virtually every other motorcycle brand in the industry, last year was tough on unit sales, though there were some very promising trends later in the season. As such, everyone is trying to spin the events and put their best foot forward – Ducati included.
So while it is at least strange to see the Bologna brand touting its cash flow results for 2020, one can at least understand why they are doing so.
What is more interesting though are some of the tidbits Ducati released in the process, which shows an insight into the company’s operations and trends.
Perhaps the most intriguing morsel of information is the report that Ducati gets on average €14,883 for each motorcycle it sells (a figure that increased in 2020, from € 13,500 in 2019).
Ducati’s trend towards more expensive motorcycles has surely been noticed by anyone paying attention to the company’s sticker prices on its latest offerings (especially the V4 models).
It is possible too that this rise in per-unit-turnover is a result of the pandemic itself, with higher income buyers able to weather the economic storm better than those in the middle and lower classes .
Of course, higher-income buyers are also more likely to be the ones buying Ducati’s more expensive models.
This could certainly be a reality, as we saw a similar trend during the Great Recession of 2009/2010, where premium brands saw sales increases while the rest of the industry burned – due largely to the fact that their customers weren’t as affected by the recession as others.
Next, we see Ducati reporting an operating margin of 4%, which is a figure of how much profit Ducati makes off its business, before paying any tax or interest on loans.
That is a lean figure for any business, and it is worth noting that in the automotive sector, an operating margin of around 7.5% is considered the average – nearly double of what Ducati is reporting here.
However, we have to remember that this figure comes during a time when motorcycle sales and production (especially in Italy) ceased for nearly two months.
Without diving into a deep analysis of other brands, but for a frame of reference, KTM estimates in its mid-year 2020 report that it will have an operating margin between 4% and 6%. This comes from a brand that operated at a 9% margin in 2019.
The two motorcycle manufacturers aren’t a perfect comparison, but we can see the trend clearly enough, and extrapolate from there.
Still, Ducati’s operating margin could be the driving factor around the brand’s push for more expensive (and more profitable) motorcycle models.
An interesting analysis might be to look at the margins between the different model segments in Ducati’s lineup, especially with the Scrambler lineup.
We know that on the dealer side of that equation, the Scrambler models have thin margins, and rely on a high volume of aftermarket parts and apparel sales to balance out the equation. That being said, those non-bike sales would factor into Ducati’s operating margin figure already, so they should balance out in the end.
Still, if I was a betting man, I would expect to see Ducati continue to stratify its product lineup, with a healthy dose of a high-margin machines for more discerning buyers.
The Italians have already cut out three tiers of models within its brand, with the Scrambler lineup focused on the more price-oriented buyers; the new Monster is clearly aimed at the middle tier, with strong value for the dollar; and the V4 lineup and specialty bikes like the Hypermotard 950, Diavel, and XDiavel commanding princely sums.
With Ducati’s unionized workforce in Bologna resistant to seeing models built outside of Italy’s borders, we will continue to see the reality that a motorcycle built in Europe (or the United States for that matter) is going to cost more than the same machine built in China, India, or Southeast Asia.
This may be the cost of being an “Italian” brand in the eyes of the consumer, but in reality it really only means that we can expect Ducati Motor Holding to continue to push its price tags higher and higher.
Ducati said it themselves in their report, “This consistently reflects the strategy of evolving the product range towards the highest and premium part of the market.”
To that end, we saw Ducati report a revenue last year of €676 million, which is less than the €716 million reported in 2019, but not a bag figure when you consider the six-week stoppage of Ducati’s factory during the devastating outbreak in Italy of COVID-19.
Of course the real driving figure is the operating profit, which dropped from €52 million in 2019 to €24 million in 2020. It will be interesting to see what 2021 holds in this regard.
“2020 was indeed a challenging year but we are satisfied with our financial performance throughout,” said Ducati CEO Claudio Domenicali. “Thanks to rigorous discipline, we were able to reduce fixed costs thus limiting operating margin drop.”
“At the same time, vastly reducing inventories had positive effects on cash flow, which is the best ever recorded to date. Investments in new products were fully untouched and this paved the way for a positive development of Ducati in the future.”
“A heartfelt thank you goes out to the women and men of Ducati who, every day, with passion and dedication, contribute to the company’s strength and success even in this very complex and tough year.”
Source: Ducati Motor Holding
Comments