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The cost of meeting the emission reduction rules could be an underestimated challenge for Ferrari's upscale carmaker.
Photo:
Seth Wenig / Associated Press
Ferrari
is the kind of company that drives itself. Good behavior by investors is another question.
The Italian high-end car manufacturer is smaller and easier to manage than the more diversified global car manufacturers. Its grunt products attract loyal customers among the jet set. They are on waiting lists and pay very high prices that justify a very high market valuation.
Sergio Marchionne, the former managing director of Fiat Chrysler, left Ferrari in 2016 and became the boss of both. His untimely death in July brought Ferrari president Louis Camilleri, who for years led Marlboro cigarette giants.
Altria
and
Philip Morris International
,
in charge.
Camilleri prepared a four-year plan Tuesday at the company's headquarters in Maranello, Italy. The most controversial issue among analysts was whether he would respect Mr. Marchionne's aggressive $ 2 billion ($ 2.33 billion) target for adjusted earnings before interest, taxes, depreciation and amortization in 2022. He eventually replaced it with a 1.8 billion and 2 billion euros. Investors shrugged their shoulders: equities rose slightly that day.
Ferrari faces two big challenges: the first is how to grow while maintaining the exclusivity appreciated by existing customers. The company plans to sell more products designed for tourism and, in 2022, will launch something that looks like a SUV that Mr. Camilleri insists on calling a purosangue or thoroughbred. "I hate to hear SUV in the same sentence as Ferrari," he said.
An underestimated challenge may be the cost of meeting the emission reduction rules. Ferrari is currently exempt because it manufactures less than 10,000 cars a year, but will soon exceed that limit. this year, shipments will exceed 9,000. Its strategy is to introduce expensive hybrid engines.
Capital spending for hybrid engines and the push of the products will be about 650 million euros this year, compared with 392 million euros last year. Next year, it will be even higher, which will weigh more on cash flow. Ferrari is now evaluated based on the stocks of the most expensive luxury goods: its shares are currently changing hands for 34 times the expected profits. But the luxury sector does not have that kind of capital commitments.
The smooth transition of leadership since the death of Mr. Marchionne augurs well for the challenges that Ferrari's growth will bring. This does not necessarily mean that its stock will continue to accelerate.
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