The Ca.165, despite being considered the winner in the mock fights, lost the final evaluation. Apparently, test pilots flying the Ca.165 managed to outperform the Falco but disliked the aircraft itself. The faster speed was a more modern concept for a new generation fighter (especially in the interception of fast bombers such as the Bristol Blenheim, which often proved too fast for the Falco), and speed was an increasingly important design consideration in World War II-era aircraft. The engine's poor reliability was also apparent, and when considering which aircraft to produce, this could have been a disadvantage as well.
