On 11/04/2012 02:43 PM, scott wrote:
>> So... how the hell did Fiat manage to afford Ferrari?
>
> Because there are 2 million Fiats sold each year, yet only 5000
> Ferraris. Which brand would you rather own? Hint: if you choose
> correctly you could buy the other one with about 2 weeks of profit :-)

OK, let's do the math on this...

Fiat sells in the budget market. In that segment, if you have a 3% 
profit margin, somebody else will come along and start making the same 
thing, but selling it at only 2% profit, and everybody will buy that 
instead of yours, so you shut down. And then somebody else will start 
selling it at 1% profit, etc. In summary, we can take it as read that 
Fiat sells its cars at only fractionally more than the actual 
manufacture cost.

Suppose for argument's sake that the cheapest Fiat you can buy is 



We've already agreed that Fiat is selling nearly at-cost. In other 

manufacturing a car. Now, a Ferarri probably costs slightly more to 

might be /priced/ at twice as much as a 1L engine, but it doesn't 
actually /cost/ twice as much to machine it. No doubt the Ferarri has 
nicer fabric lining the seats and a few other bits and bobs. Let's 
over-estimate and pretend that the Ferarri costs 2x to manufacture.







Now, explain to me again, *how* can Fiat afford to buy Ferrari??

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