Chris Bryant, MDT/Bloomberg
For those who aspire to cryptocurrency riches, the entreaty “When Lambo?” long ago became a popular way to refer to that blessed day when you’re finally wealthy enough to buy a luxury sportscar.
The soaring price of Bitcoin and other financial assets means more and more people are in a position to join that club. And after having been stuck at home for a year the newly wealthy are in a mood to spend. This is undoubtedly good news for Lamborghini’s owner, Volkswagen AG, which has seen the attractiveness of its Italian subsidiary shoot up among potential buyers of the asset.
This week Volkswagen received a non-binding 7.5 billion-euro ($9.2 billion) offer to acquire Automobili Lamborghini SpA from a consortium that includes Quantum Group AG and investment firm Centricus Asset Management, according to Autocar magazine. The German giant said Lamborghini wasn’t for sale, but it shouldn’t be so quick to dismiss the idea.
Now would be the perfect time to realize full value from Lamborghini, which is controlled by Volkswagen’s Audi subsidiary. Orders are booming and rival Ferrari NV’s richly valued shares show there’s strong investor demand for luxury sportscar manufacturers. As with Ferrari, the expensive and delicate task of electrifying Lamborghini’s thirsty engines still lies ahead — so it might be a good moment to hand that job to someone else.
At the very least, the consortium’s offer will remind investors of the value that’s locked up in Volkswagen’s unrivalled stable of luxury car brands. If only it were bolder in doing something about it.
Volkswagen doesn’t break out Lamborghini’s profitability but it’s become a decent money spinner. After the pandemic interrupted production, sales have been rocketing lately. The unit generates double-digit operating margins, Volkswagen boss Herbert Diess confirmed recently. That’s thanks largely to the new Urus SUV, of which Lamborghini sells more than 4,000 yearly. The brand’s street cred with the newly affluent crypto crowd may have played a role, too. Its customers are typically younger than Ferrari’s, Diess notes. Lamborghini sold about 7,400 vehicles last year, compared with Ferrari’s more than 9,000.
Lamborghini hasn’t done anything to lure new Bitcoin millionaires that’s as crass as Rolls-Royce Motor Cars Ltd. — the British company’s special edition “Wraith Kryptos” saloon is billed as an “homage to the clandestine world of cryptology” and incorporates a coded message that customers are invited to solve. But “When Lambo” isn’t just for laughs. At least one Lamborghini dealership claims to accept payment in crypto.
So why not take advantage of the hype? Volkswagen flirted with an initial public offering or sale of Lamborghini last year before deciding to keep it. The company has developed an unfortunate habit of tantalizing investors with potential asset sales and then retreating. A separate listing for its Porsche unit isn’t a high priority, Diess said in March, weeks after giving investors (and financial columnists) cause for hope.
It’s reassuring that Volkswagen doesn’t think it needs money from asset sales to fund its massive spending on electric vehicles and software. (Lamborghini has just unveiled its own hybrid and electric strategy, which will cost about 1.5 billion euros over four years.)
But the German company’s hesitancy toward divestments has taken some of the shine off its soaring share price. While the more liquid preference shares are still up 43% this year, they’re more than 10% below last month’s peak.
Impulse decisions might be fine for Elon Musk’s Tesla Inc. but building a consensus for big strategic sales takes years at Volkswagen’s Wolfsburg headquarters. That’s because of the outsize influence of 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 as valuable once their growling combustion engines are replaced by electric motors. The fat takeover offer that landed on his desk this week provides a compelling alternative. Chris Bryant, MDT/Bloomberg
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