Will Ferrari go electric open the door to Lamborghini, Aston Martin?

Ferrari is the supercar of choice for those who want to flaunt their wealth with a bit of snarling and sometimes growling V-12 bravado. Budding brands like Lamborghini or Aston Martin and high-end Porsches and Mercedes simply cannot compete with the Ferrari brand, which is valued in stock markets as a rare and fashionable brand rather than just a car manufacturer. .

But this sector of the market could well be disrupted by electrification and this presents a great chance for the also-rans to finally compete with the leader. You’re here
too could decide it can compete in this electric stratosphere, where performance is quiet but at least equal to traditional internal combustion engines (ICE).

Investors have to wonder if all supercars pass in silence, maybe some of their magic could fade away.

Ferrari has now outlined its plans to go electric, and analysts say there are big challenges ahead if it is to electrify and boost its already sizable profit margins.

“First impressions of Ferrari’s long-awaited (electrification plan) are positive. There has been no ‘reinvention’ or big surprises,” Jefferies analyst Philippe Houchois said.

Houchois said Ferrari’s goals were ambitious and challenging.

Ferrari’s share price has been falling since late March when it hit just under €210. Just before the June 14 meeting, it had slipped to around €160, but jumped on the news to close the week at just under €168, according to Reuters. Ferrari shares are valued as being comparable to those of luxury goods makers like Hermès, LVMH, Prada, Ferragamo, Moncler or Richemont with their massive profit margins, rather than more mundane metal bashers like Volkswagen and or Stellantis.

Ferrari has confirmed in a meeting at its headquarters in Maranello, Italy, that it will launch its first all-electric car in 2025. Ferrari expects all-electric cars to account for 5% of sales in 2025 and 40% in 2030. Petrol/electric hybrids for 40% in 2030 with the rest ICE. Ferrari will spend 4.4 billion euros ($4.63 billion) to develop all-electric and plug-in hybrid electric cars to account for 60% of its sales by 2026. Meanwhile, Ferrari’s annual profits , measured by EBITDA (earnings before interest, tax depreciation) will accelerate to 2.7 billion euros (2.84 billion dollars) in 2026, from 1.5 billion euros (1 .58 billion) last year.

“Everything we do will always be about being distinctly Ferrari,” chairman John Elkann said at the meeting. “The opportunity set of electrification and electronics will allow us to make even more unique cars,” Elkann said.

Reuters’ Breaking Views column said Ferrari needed to catch up in the electric car world, but even in this rarefied segment the wealthy have limits to their ability to pay.

“Success will likely hinge on convincing Ferrari’s exclusive clientele of millionaires to pay even higher prices than they currently are,” said Breaking Views columnist Lisa Jucca.

“Ferrari averaged €320,000 ($336,600) in revenue per car in 2021, while it sold just over 11,000 vehicles, according to Breakingviews calculations. Vigna’s (Ferrari CEO) new plan , Benedetto) implies that vehicle sales will increase by €2 billion to around €5.4 billion in 2026, with the rest coming from sponsorship and engine sales.If Vigna increases its annual production to 13,500 cars , it should charge an average of €400,000 per car, an increase of 25%,” said Jucca.

“Such a rise seems hard to swallow, especially in an era of higher interest rates and plummeting stock markets,” Jucca said.

But Ferrari sales of super-priced limited-edition ICE cars may help fill the gap.

As long as the “wealthy bettors” are happy to keep paying for these ICE cars, “Vigna’s

the green deviation seems manageable,” Jucca said.

Ferrari sells limited-edition supercars like the Monza SP1 and SP2 for around $1.85 million each. Ferrari is due to launch a Purosangue hybrid SUV in September, which will compete with the Lamborghini Urus, Bentley Bentayga and Aston Martin DBX.

Some analysts were eagerly waiting for Ferrari to enter the era of the electric car. Morgan Stanley
Analyst Adam Jonas felt electric cars would be a plus, not a minus, and said so last year.

“We see Ferrari as a new game of EVs that is very neglected by the market. The window of opportunity to own Ferrari as the market maintains its ‘EVs are bad for Ferrari’ narrative will not last long. Why do we think us that electric vehicles are positive for Ferrari?” Jonas said this would increase the total addressable market, improve growth, reduce costs, improve margins and improve the stock’s relevance for investors outside of luxury goods and traditional car manufacturers.

But last year Goldman Sachs changed its investment recommendation to “sell” rather than “buy”, citing among other things the huge expense of adopting electric power and the difficulties in replicating its large profit margins.

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