Ferrari vs Aston Martin : A Race for Cash Grand Prix

Ferrari or Aston Martin – we've got the results from the biggest financial race in luxury autos. Hit the gas to discover who emerged victorious in this high-octane battle for dominance of receivables. Here’s what the metrics look like -

Whether racing fast or just cruising around town, luxury sports cars like Ferrari and Aston Martin are well-known for their style and performance. Behind the allure and prestige of these iconic brands lies intense competition in the business of high-performance vehicles.

In this report, we look closely at Ferrari and Aston Martin to see which marque is winning the race regarding important financial metrics and accounts receivable. More than just comparing statistics, we aim to gain insights into the financial health and strength of these storied car manufacturers.

The final lap is near - which of these sports cars will cross the finish line in the first place? It's time to start your engines and find out!

Ferrari collects its receivables 3X times quicker

Ferrari’s average Accounts Receivable Turnover Ratio (ART) ratio from 2018 to 2023 is 17, a metric that quantifies how effectively a company collects its receivables.

In contrast, Aston Martin’s ART ratio during the same period is 6. This indicates that Ferrari collects its receivables 3X times faster than Aston Martin, resulting in a higher operating cash flow for the former. (See Graph)

Here are two strong reasons why Ferrari collects faster!

Ferrari financial services: Ferrari’s expanding accounts receivable turnover ratio can be attributed to its financial services segment. This business unit represents around 87% of total receivables and had developments that allowed for faster collection across Ferrari’s receivables portfolio.

Global sales network: Ferrari has exclusive dealers in 50 countries that facilitate purchase and payment processing. Prominent billionaire clients like Lawrence Stroll and Ralph Lauren are also high-profile dealers, demonstrating Ferrari’s cash collection infrastructure through an extensive global sales network. Its worldwide dealer outlets allow Ferrari to collect payments from a vastly greater pool of customers at tremendous speed.
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Ferrari runs on a negative CCC

Ferrari has maintained a negative Cash Conversion Cycle (CCC) over the past six years, with an average of -21 days. This indicates that Ferrari consistently holds a higher amount of cash on hand and tends to pay its suppliers long after collecting its receivables.

In contrast, Aston Martin exhibited an average cash conversion cycle of 12 days from 2018 to 2023. Notably, in the last two years (2022-23), Aston Martin managed to reduce its cash conversion cycle to -55 days significantly. (See Graph)

Now, let’s delve into the specific metrics, namely Days Sales Outstanding (DSO), Days Payable Outstanding (DPO), and Days Inventory Outstanding (DIO), to analyze the factors contributing to their respective CCC scores.

Ferrari leads with lower DSO in the cash race

Over the last six years, Ferrari has maintained an average Days Sales Outstanding (DSO) of 20 days, while Aston Martin’s corresponding figure stands at 57 days. (See Graph)

Notably, both Ferrari’s and Aston Martin’s DSOs are lower than the industry average of 59 days for the automotive sector.

Here are two possible reasons why Ferrari has a lower DSO

Pre-Payment Practices and Brand Loyalty: Ferrari’s luxury image and devoted customer base often lead to pre-payments before car production, reducing DSO. Strong brand loyalty and customer financial capacity contribute to quicker payment cycles.

Hybrid Sales and Premium Pricing: With 51% of sales coming from hybrids, Ferrari’s focus on unique and high-performance models, like the 296 and SF90, drives a favorable product mix. Higher-priced hybrid and electric models result in faster payment cycles, lowering DSO.

Ferrari clears inventory faster

In the last six years, Ferrari has maintained an average Days Inventory Outstanding (DIO) of 91 days, while Aston Martin recorded 108 days. (See Graph)

It’s worth noting that Ferrari’s lower DIO implies more effective inventory management when compared to Aston Martin.

Here are two reasons why Ferrari has a lower DIO

Responsive “Zero Shortages” Supply Chain: Ferrari’s commitment to a responsive supply chain, outsourcing material handling, and implementing a “zero shortages” policy, facilitated by Infor LN and Infor ION, ensures timely component availability. This optimization in production processes minimizes delays, enhancing efficiency and resulting in a lower DIO.

Customization Efficiency: Ferrari’s lower DIO is driven by its focus on customization and an efficient production grid using Infor LN. Building 7,000 uniquely configured vehicles annually streamlines assembly, reduces delays, and contributes to a lower DIO.

Aston Martin fast-tracks supplier payments

Over the past five years, Aston Martin maintained an average Days Payables Outstanding (DPO) of 121 days, whereas Ferrari’s DPO averaged 138 days. (See graph)

Ferrari’s longer payment cycle suggests delaying supplier payments, contributing to a negative cash conversion cycle and more effective cash flow management.

Here are a few reasons why Aston Martin has a lower DPO

Shift Towards International Suppliers: Aston Martin is redirecting its supply chain towards international suppliers. By sourcing more components globally, the company has negotiated better payment terms with international suppliers, leading to a shorter payment cycle.

Cottage Industry Suppliers: Aston Martin currently sources about a third of its parts from the UK, with many produced by “cottage industry” suppliers. These smaller suppliers require more prompt payment to sustain their operations, and Aston Martin, in turn, accommodates these payment terms.

Increased Production Targets: Aston Martin has ambitious plans to increase its annual production from making fewer than 4,000 cars a year to a goal of 14,000 a year within the next decade. To achieve this, the company negotiates favorable terms with suppliers, including faster payment, and timely supply of parts to meet the increased production targets.

Ferrari Vrooms Past Aston Martin in the Cash Grand Prix

As the race between these legendary automakers nears the finish line, Ferrari has pulled ahead to take a dominant lead based on its financial metrics.

Ferrari flies past Aston Martin with 3X times faster cash collection, indicated by its much lower DSO and far shorter cash conversion cycle of negative 21 days. Powering ahead on the financial track, Ferrari keeps its vehicles rolling out 33 times faster, clearing inventory more swiftly with a lower DIO.

Meanwhile, Aston Martin puts in a valiant effort by offering suppliers a 16% shorter payment period. But it can’t gain enough ground on Ferrari’s finely tuned financial engine, which extracts maximum cash flow thanks to loyal customers and prompt payment practices.

When the checkered flag waves, there’s no doubt that Ferrari will win the race for financial performance and cash dominance over its storied British rival. Though both brands build stunning high-performance machines, Ferrari proves it has the formula to dominate the finish line where it counts – in the books.