Insight – Time to Buy a Lamborghini?
For those in pursuit of cryptocurrency wealth, asking, “When Lambo?” Long ago became a popular way to refer to that blessed day when you are finally rich enough to buy a luxury sports car.
The rising price of Bitcoin and other financial assets means that more and more people are able to join this club. And after being stuck at home for a year, the new rich are in the mood to spend. This is undoubtedly good news for Lamborghini’s owner, Volkswagen AG, which has boosted the appeal of its Italian subsidiary to potential buyers of the asset.
According to Autocar magazine, Volkswagen received a non-binding offer of EUR 7.5 billion (USD 9.2 billion or RM 38 billion) to acquire Automobili Lamborghini SpA from a consortium to which Quantum Group AG and the investment firm Centricus Asset Management belong.
The German giant said Lamborghini was not for sale but it shouldn’t be quick to turn down the idea.
Now would be the perfect time to realize the full value of Lamborghini, which is controlled by Volkswagen’s Audi subsidiary.
Orders are booming and rival Ferrari NV’s highly valued stocks show that investor demand for luxury sports car makers is strong.
At the very least, the consortium’s offer will remind investors of the value of Volkswagen’s unparalleled inventory of luxury car brands. If only it were braver to do something about it.
Volkswagen isn’t breaking Lamborghini’s profitability, but it’s turned out to be a decent money spinner.
After the pandemic halted production, sales have skyrocketed recently. The unit generates double-digit operating margins, Volkswagen CEO Herbert Diess recently confirmed.
This is largely thanks to the new Urus SUV, of which Lamborghini sells more than 4,000 a year. The brand’s street credo may also have played a role in the newly wealthy crypto crowd.
The customers are generally younger than Ferrari’s, so Diess.
Lamborghini sold around 7,400 vehicles last year, compared to more than 9,000 for Ferrari.
Lamborghini has done nothing to attract new Bitcoin millionaires who are as blatant as Rolls-Royce Motor Cars Ltd – the British company’s special edition “Wraith Kryptos” is considered a “homage to the secret world of cryptology” and contains an encrypted message that Customers are invited to resolve.
But “When Lambo” isn’t just for laughing. At least one Lamborghini dealer claims to accept payments in crypto.
So why not use the hype? Volkswagen flirted with an IPO or sale of Lamborghini last year before deciding to keep it.
It’s comforting that Volkswagen doesn’t think it needs money from asset sales to fund its massive electric vehicle and software spending. Lamborghini has just presented its own hybrid and electric strategy, which will cost around EUR 1.5 billion (RM 7.6 billion) over a period of four years.
Hesitation in selling
However, the German company’s reluctance to sell has made the rising share price shine a little. While the more liquid preferred stocks are still up 43% this year, they are more than 10% below last month’s high.
Impulse decisions may be fine for Elon Musk’s Tesla Inc, but it takes years at Volkswagen’s Wolfsburg headquarters to reach consensus on big strategic sales.
This is due to the excessive influence of the workers, the Porsche / Piech families and the state of Lower Saxony.
And yet it was Diess who raised the question of whether “brilliant” luxury brands like Lamborghini would remain so valuable if their growling internal combustion engines were replaced by electric motors. The fat takeover offer that landed on his desk this week offers a compelling alternative. – Bloomberg
Chris Bryant is a Bloomberg Opinion columnist on industrial companies. The views expressed here are those of the author.