Ferrari prancing horse will need its skilled driver

Ferrari prancing horse will need its skilled driver

Ferrari prancing horse will need its skilled driver

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If there’s one lesson from the strategy update Ferrari NV delivered at its Maranello headquarters this week, it’s this: the prancing horse isn’t about to alter its winning gait.

Aside from a mixed record on the Formula 1 race track, Ferrari has barely made a wrong step since its 2015 stock listing. It has convinced investors to think of it as a luxury brand like Hermes International rather than an automotive company. destroyer, and it enjoys a princely valuation to match: Ferrari’s €30 billion ($32 billion) market capitalization – even after a one-third drop from its 2021 peak – is surprising, considering that sold just 11,000 cars last year.

But given its reliance on powerful combustion engines, there is understandable apprehension about what the epochal shift to electric vehicles means for its stellar financial performance. The imminent launch of a Ferrari SUV, the Purosangue, also worries purists: a look at the ugly (albeit very profitable) tractors made by Bentley, Lamborghini and others explains why.

Benedetto Vigna, who has been the automaker’s CEO since September, brings a wealth of tech experience from his experience at STMicroelectronics NV, but he doesn’t have much automotive or luxury experience.

However, Vigna and his team will have assured Ferrari purists that their company is in good hands. The company plans to increase revenue by more than half by 2026, but the increase will come largely from rising prices and offering desirable models rather than compromising exclusivity.

It’s a big plus in this inflationary era that Ferraris are also collector’s items: Customers often have several in their spacious garages and pay whatever the Italian company requires. Ferrari’s sales have also proved resilient in past recessions, a quality that could soon be tested once again. While there are undoubtedly some cryptos that can no longer afford an SF90 Stradale, which starts at around $500,000, Ferrari has not seen demand deteriorate.

Indeed, the company could no doubt sell a lot more vehicles than it plans to, especially with the Pursoangue due to arrive in September, providing Ferraristi with a more hands-on family ride to complement its racing machines. However, the company claims that Purosangue will account for a maximum of 20% of its sales; the comparable Urus contributes 60% of Lamborghini’s sales volumes.

I think this is the right decision: Ferrari’s luxury cache would be compromised if its vehicles became as commonplace as Range Rovers.

Fortunately, Ferrari investors will not be left empty-handed. Its already industry-leading operating profit margins of 25% are set to expand, and the company aims to generate nearly €1 billion of free cash flow a year by 2026, with disciplined spending. Electrification is a priority; fully autonomous driving not so much (customers still want to drive their sports cars, after all).

Battery-powered vehicles remain a risky start for Ferrari, given its association with V12 engines, so the company is taking its time: the first all-electric Ferrari won’t arrive until 2025. Even in 2030, it still expects hybrid, all-fossil fuel cars. represent 60% of its model line. The company hopes cleaner synthetic fuels will allow customers to continue driving combustion models. It also plans to plant a forest in Italy to achieve carbon neutrality.

To me, their approach to electric vehicles seems too slow, but at least the planet won’t be hurt too much by their delay: Ferrari’s carbon footprint is small – according to company estimates, it accounts for 0.001% of global emissions, in part because customers’ thirsty sports cars rarely leave the garage. Scrap emissions are also not an issue because customers often keep their precious vehicles forever.

But Ferrari cannot afford to rest on its laurels. The European Union wants all vehicles sold from 2035 onwards to have zero exhaust emissions, and while Ferrari has so far avoided the trap of becoming an old-timer brand – nearly 40% of customers are under 40 – there is the risk that faster rivals redefine what a luxury electric car looks and sounds like.

Porsche AG’s electric Taycan already outsells the 911 model, and soon the very profitable Volkswagen AG subsidiary will have its own stock market listing, offering competition for portfolio managers’ investment dollars as well as their budgets. cars. Mercedes-Benz AG is also trying to position itself as a luxury electric leader.

Still, I’m confident that with tech expert Vigna at the helm, Ferrari will eventually create electric vehicles that are as enviable as their gas-guzzlers. The Italian thoroughbred remains in good shape, but should not slow down.

More from Bloomberg’s opinion:

• Which side of an EY split do you want to be on?: Chris Hughes

• SoftBank’s Son Survived Bigger Disasters: Gearoid Reidy

• Tiger Global and the Perils of Hedge Funds Crossover: Shuli Ren

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Bryant is a columnist for Bloomberg Opinion covering industrial companies in Europe. Previously, he was a reporter for the Financial Times.

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