Ferrari Must Embrace Electric Power To Ensure Future.
“To be clear, we think Ferrari cannot avoid moving substantially 100% of its product to pure EV (electric vehicle) form over time”
Ferrari’s future will be determined at a meeting next week and investors hope the Italian luxury supercar maker will horrify traditionalists by embracing electric power, finally giving the go-ahead to an SUV, and shooting for ambitious new sales and profit targets.
If Ferrari decides to go for radical changes, it has a chance to survive and thrive in the radically different world of electric power, autonomous driving, and cities which ban cars powered by internal combustion engines.
If it decides to stick with just making more fabulously expensive and raucous vehicles, more at home on the track then the road, it is likely to slip into a dying niche, with a future in the museum.
Ferrari investors have been nervous ever since new CEO Louis Camilleri said in July he thought the profit target for 2022 set by the late CEO Sergio Marchionne was “aspirational”.
Marchionne had set a target for EBITDA (earnings before interest, tax, depreciation and amortization) profits of €2 billion ($2.3 billion) by 2022. Given that “aspirational” sounds a bit wobbly, investors will be seeking assurance at the meeting Tuesday in Maranello, Italy, that is going to be achieved.
Citi Research expects Ferrari to announce a new Ferrari Dino at the meeting, possibly more details and a firm schedule for the SUV, and perhaps a limited edition high end vehicle, possibly named after Marchionne.
Asking too much
“It is probably asking for too much to expect all three, but if it does happen we’d expect the market will react positively. Our base case is the unveiling of the Dino and some detail on the ‘FUV’ (SUV). We believe a meaningful increase in volumes is required in order to obtain the €2 billion EBITDA target in 2022,” Citi Research analyst Raghav Gupta-Chaudhary said.
“We would not be surprised to see the company move to providing ranges for its mid-term targets, and as such expect the EBITDA guide will move from €2 billion in 2022 to €1.8 to €2.0 billion,” he said.
Ferrari sold 8,398 vehicles in 2017, led by 12-cylinder models like the GTC4Lusso and the 812 Superfast, and has said this will rise to more than 9,000 in 2018. At the Geneva Car Show in March Ferrari launched the 488 Pista with a 710-hp V8 engine. This successor to the 360 Challenge Stradale, 430 Scuderia and 458 Speciale will blast from 0-60 mph in 2.7 seconds and on to 211 mph.
Investors already expect Ferrari to aim for annual sales of 15,000 in the medium term.
Investment bank Morgan Stanley doesn’t expect Ferrari will announce an all-electric Ferrari at the meeting but said this is the most important decision that has to be taken by the company to secure its future.
“To be clear, we think Ferrari cannot avoid moving substantially 100% of its product to pure EV (electric vehicle) form over time. Additionally, we believe one can reasonably expect the house to be making moves today to ensure that a transition to electric can support an independent Ferrari for decades to come,” Morgan Stanley analyst Adam Jonas said.
“If Ferrari wants to be anything more significant than a niche producer of vehicles for racing and private tracks or for use on increasingly fewer public roads (it needs to embrace EVs). If Ferrari were to avoid the pure EV route, we believe it may also run the risk of facing a large number of firms producing pure EV sports cars that offer superior power to weight, acceleration, performance and safety,” Jonas said.
Jonas also expects the €2 billion EBITDA target for 2022 to be retained along with the “aspirational” language. He also expects to hear targets for higher sales, pricing and margins.