Ferrari chief signals strategy shift, flags potential volume leap

MILAN (Reuters) - Italian luxury carmaker Ferrari RACE.MIRACE.N could sell more than 10,000 cars a year by 2025, its CEO said on Monday as he signalled a strategy shift after presenting better than expected quarterly earnings and upgraded full-year guidance.

View of Ferrari logo seen at the Mondial de l'Automobile, Paris auto show, during media day in Paris, France, September 30, 2016. REUTERS/Jacky Naegelen

Spun off from Fiat Chrysler FCHA.MI at the start of the year, Ferrari has been under pressure to show it can increase profit without the backing of a larger parent. Marchionne had promised to position the group as a luxury goods business by expanding the brand beyond cars, but on Monday he said the focus would be on vehicles first.

Ferrari has committed to ship about 8,000 cars this year and gradually raise that to 9,000 by 2019. It has not made any promises beyond that, to protect the brand’s exclusivity but also because of regulations that exempt it from certain fuel economy and emissions requirements provided it sells fewer than 10,000 vehicles a year.

Marchionne, however, vowed that all vehicles sold from 2019 will have some hybrid elements, which could open the way to go beyond the volume limit.

The CEO promised a “fundamental shift” in the way Ferrari manufacturers its cars. Beyond hybrids, this will include a combination of combustion and electrification that will “even yield additional performance”, he said.

“Although I neither commit to this nor do I give any sort of certification of it being our objective, it is possible that the (annual sales) number could be well in excess of 10,000 cars in 2025,” Marchionne told analysts.

But the manager also said the carmaker would expand the range to vehicles that appeal to a larger demographic by focussing on characteristics other than the technological prowess typical of its recent 8-cylinder and 12-cylinder models.

One such example is the GTC4Lusso T, a four-seater with a smaller V8 turbo engine, “designed to be driven every day”, the company said when the car was unveiled in September.

Marchionne added that it is easier “to generate profits and cash if we stick to cars while at the same time look at the extension into luxury at a more reasonable pace”.

Ferrari’s share price rose more than 7 percent on Monday after it posted a 10 percent rise in third-quarter adjusted core earnings and sales up 8 percent, though the stock still hovers only slightly above its IPO price of $52.

“It seems that Ferrari is now considering adding up to two new models to its range over the next four to five years - and it seems this approach is gaining favour over potential brand extension strategies,” said Exane BNP Paribas analyst Stuart Pearson.

“This could be a material positive ... and, combined with a focus on hybridisation, could allow Ferrari to breeze through the 10,000 volume cap.”

Ferrari said it now expects full-year adjusted core earnings of about 850 million euros ($939 million), against a previous forecast of at least 800 million euros.

It also delivered an improved forecast for net debt of less than 700 million euros by year-end.

($1 = 0.9056 euros)

Reporting by Agnieszka Flak; Editing by David Goodman