Ferrari Looks to Double Earnings by 2022 with Hybrids, SUVs

Italian car brand Ferrari wants to double profits to €2 billion (over P128 billion) by 2022. The company will focus its production on hybrids and SUVs to help achieve this goal.

Ferrari reported a profitable 2017, with earnings before interest, tax, depreciation and amortization (EBITDA) standing at €1.04 billion (over P66 billion). The numbers exceeded expectations, as the company initially predicted it won’t breach the €1 billion profit margin in at least another two years. Ferrari credits the sales boost to its 12-cylinder models such as the GTC4Lusso and 812 Superfast, Ferrari's fastest car to date.

For 2018, Ferrari adjusted its EBITDA prediction to at least €1.1 billion (over P70 billion) and sales of more than €3.4 billion (over P218 billion). The company also expects to ship over 9,000 vehicles this year, up from 8,398 units last year.

Ferrari tends to make conservative forecasts, so analysts say there’s plenty of wiggle room for the supercar maker to make adjustments. The company released its midterm forecast, which suggests an average year-on-year profit growth between 14 to 18 percent.

"This type of earnings growth is unlikely to be seen by any other automotive OEM over the coming five years, particularly taking into consideration economic and business cycles," said George Galliers, an analyst at Evercore ISI, a global independent investment banking advisory firm.

However, Galliers expressed doubt that the projected growth would attract the right investors, considering that Ferrari’s stock leans toward the pricey side.

After divorcing from Fiat Chrysler in 2016, Ferrari was eager to show that it can remain profitable even without the backing of its parent company. At the same time, it also wanted to boost sales without compromising its luxury status.

In recent years, Ferrari has managed to achieve record earnings, thanks mainly to the strong sales of its special edition models. However, according to CEO Sergio Marchionne, the Italian car brand was now approaching the limit of cars it can produce from its current range, and proceeding on its current path could weaken its exclusive appeal. Marchionne believed that the company needed to look beyond supercars, and that hybrids and SUVs hold the answer.

Some investors have expressed concerns, thinking that the new direction could impact the brand negatively, but Marchionne, who is set to leave the company in 2021, said that investors have nothing to worry about, as the new Ferrari SUV will still cling to everything that the company stands for—luxurious fast cars.

Marchionne said a planned Ferrari SUV will be launched by 2020, before his scheduled departure from the company.