No orders cancelled due to Covid-19 as just 5% parts come from China: Lamborghini

During our recent interaction, Stefano Domenicali, Chairman & Chief Executive Officer, Automobili Lamborghini shared some insights about the supercar brand amid the current Covid-19 situation. The brand's supply chain is quite sorted now. Lamborghini says that when it restarted production of cars on May 4, it was able to do it immediately (keep in mind that even if a single part is missing, you cannot make a car). The company started with 75% capacity utilisation, and by June starting, it will reach 100%.

By:June 1, 2020 11:17 AM
Lamborghini Huracan EVO RWD Coupe

It’s niche amongst the niche. Last year, Automobili Lamborghini sold 8,205 cars globally (that’s 0.01% of global car sales), and about 55 units in India. It’s got three model lines—Urus, Aventador and Huracán—and the fourth is being developed. The Covid-19 pandemic hit Italy quite early, and the company contributed by supporting ventilator manufacturers and producing surgical masks and medical shields. On May 4 it restarted production of cars (these had been suspended on March 13) with 75% capacity utilisation, and this week it aims to reach 100%. “A lot of global orders have definitely been delayed, but there is no cancellation due to Covid-19,” says Stefano Domenicali, chairman & chief executive officer of Automobili Lamborghini, sitting in his office in Sant’Agata Bolognese in northern Italy, which is also the only manufacturing plant of the company in the world. In a videoconference call with FE’s Vikram Chaudhary, he adds that there has been a lot of learning during the lockdown.

How will social distancing measures impact sales, and track experiences, of high-end cars such as Lamborghini?

Our products are meant to be lived, emotionally. During the current times, when the ‘mood’ is not upbeat, there is definitely an impact. At the same time, the signals we are receiving are not negative. The current measures (social distancing, lockdown) are transitional, they will not stay forever … the customer of our brand is still there and will emerge stronger when these measures come to an end. As far as track experiences and launches are concerned, in the short-term we had to stop all the events, because the positive mood (to enjoy our cars) isn’t there. However, we shifted a lot of events on to the digital platform, where we are very strong—we recently launched the new Huracán EVO RWD Spyder using augmented reality. This way we can keep our fans and customers engaged, who, we are sure, will go back to physical events once things return to normal.

We also believe our sector, in general, will suffer less in the medium term, because our customers are not really impacted by this crisis—it’s really the mood that is not there today, but will come back. It is human nature to think positive.

For many years sales of Lamborghini cars have been growing, and 2019 saw record sales of 8,205 units. This year, what is the realistic sales forecast?

Our plant was closed for seven weeks, so that seven-week production is lost. Some of these can be recovered by agreements with our unions (in terms of extra working time), but we cannot recover all the cars (lost due to the shutdown). Our sales forecast for 2020 has been lowered, but it’s difficult to predict the number right now. It will be significant, and we will monitor what would be the adjustments to the total volumes. It will also depend on how the new order log starts again. One good thing is we did not see any cancellation of pending orders.

So there are no cancelled orders due to Covid-19?

No, there are no cancelled orders due to Covid-19. Both customers and dealers have confirmed that they want their cars, some of them have said there is no rush, but globally there is no cancellation of a single model.

Will the car allocation for the Indian market be negatively impacted?

Last year we sold a little over 50 cars in India. I am sure this year that number will be lower. I cannot share the exact allocation for this year as it’s a bit early, but we are the best super sport brand in India and want to keep up the growth of the brand in your lovely country.

How will your global supply chain change due to Covid-19? Which all parts in Lamborghini cars are sourced from China?

Our supply chain is quite sorted. When we restarted production of cars on May 4, we were able to do it immediately (keep in mind that even if a single part is missing, you cannot make a car). We started with 75% capacity utilisation, and in the beginning of June we will reach 100%. You can do that only if the supply chain is working. Like all automakers, we have a globalised supply chain, but it has been managed very carefully by our people.
This crisis has shown us that we are living in a globalised world, and yet relying on sourcing from a single place may not be the best thing to do. We source less than 5% of our parts from China.

Will the Covid-19 economic crisis impact the development of the ‘fourth model’?

Between today and 2025-26, our goals will not change. We are going to stay with three model lines till then, there are new products in the pipeline, there will be some facelifts, but the strategy in terms of portfolio is not affected by the Covid-19 crisis. The only thing that is affected is the timing of the release of products, but in the long-term nothing has changed.

Will cars such as the Terzo Millennio be actually produced for the market?

We called it the Terzo Millennio because we believe it is a futuristic car (for the new millennium). It has innovative materials, a unique propulsion system, and we also plan to move away from conventional batteries by investigating the potential of supercapacitors to equip future cars. The Terzo Millennio is a long-term plan and after 5-8 it could be a possibility.

Do you see Formula 1 changing due to Covid-19?

This is an opportunity to reshape the business model of Formula 1. The FIA World Motorsport Council has approved changes to Formula 1 regulations concerning the 2020, 2021 and 2022 seasons, and this is the first step towards that reshaping. All motorsport needs to be more sustainable in the future.

Between Formula 1 and Formula E, which do you prefer?

Formula 1 has been my life; it’s like a solid rock inside my soul, and I prefer Formula 1 by far. At the same time, at Formula E as well some great stuff is happening and I appreciate them.

Does Lamborghini plan to revive old nameplates such as the Diablo or Miura or Countach?

You will hear some good things happening over the next couple of years (and there will be news connected to that in the very near future).

What percentage of revenues does Lamborghini generate from merchandise?

Our brand extension activities are going on very well. Whenever we launch our merchandise collections, these are usually sold out in minutes. We are expanding in areas where we were not present before—we entered eSports arena for the first time with ‘The Real Race’, which is a blend of the real and virtual worlds of racing. These activities currently form about 5% of our revenues but will grow very quickly in the next couple of years.

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