Yahoo Finance’s Pras Subramanian joins the Live show to discuss key takeaways from Ferrari’s Q1 earnings call and CEO Benedetto Vigna’s remarks on the Italian luxury sports car manufacturer’s Purosangue SUV.
RACHELLE AKUFFO: Race results. High-end car maker Ferrari rolling forward on strong deliveries, proving that demand across the luxury market remains strong. Analysts betting its pipeline of upcoming cars-- available of course, only on waitlists-- can help Ferrari maintain its lead over general automakers as the industry moves to electrification. Here with more is "Yahoo Finance's" Pras Subramanian. Hey, Pras.
PRAS SUBRAMANIAN: Hey, Rachelle. That's right. Ferrari's first quarter earnings highlighting the continued strength of its core luxury clientele. Ferrari's earnings revenue topped estimates, and the automaker reaffirmed its full-year outlook with an EBIT margin forecast of 26%. That's a company that knows how to make money. And a big moneymaker could be its newest car, the Purosangue SUV. Here's CEO Benedetto Vigna talking about customer reaction that was so strong they had to close the order book.
BENEDETTO VIGNA: At the beginning when we launched the cars, we were not expecting such strong, let's say, reaction from the clients. So we had to put a little bit a stop to organize ourselves so that we could reopen properly. So there is no change in our strategy.
PRAS SUBRAMANIAN: With order books back open, if you want that Purosangue, Vigna says to get that order in now. That being said, my key takeaways from the call are this. One, robust demand. Ferarri increased shipments as new cars came online. The 296 hybrid supercar, the Ferrari Roma-- these are hot cars that customers want. Vigna mentioned the order book for those cars sold out through 2025.
That's how strong demand is. Pricing power and the luxury consumer. That Purosangue SUV? It costs over $400,000. Those high prices and the desire of customers for personalization leads to those juicy margins that are the envy of the industry. It seems Ferrari's customers will continue to pay up more for these cars like the Purosangue as long as they can maintain exclusivity and individuality.
Electrification plan. While the world goes crazy for EVs, Ferrari has to keep its customers happy, and they want those high-revving engines and dramatic engine roar. Enter the hybrids. We're seeing the product mix shift to hybrids. In the back half of the decade, we'll see only hybrids in Ferrari EVs. And the Ferrari EV is coming in 2025. It will be a true test of whether true Ferrari fans will accept full electric power when that happens.
So in terms of a vibe check, I'm gonna go with good here. Going with good. Ferrari is making money. They have the deep order book, and the hybrid game plan is going very well. Those cars are well-received, and the question is by the end of the decade, will its fans accept true electric power? And can Ferrari make it exciting and stand out from the rest of the luxury competition?
BRAD SMITH: All right. So this Ferrari report, it follows strong earnings by Porsche, Mercedes, and others-- Mercedes was actually so good they had to report early as well. So what does this tell us about the luxury car market right now?
PRAS SUBRAMANIAN: You talk about Mercedes, they knocked out of the park. Porsche, as well. Even Aston Martin saw deliveries increase and revenue increase, which is kind of a surprise. So we're seeing that luxury consumer is still strong right now, given all the issues we're seeing with the global economy. They're willing to pay up-- they're willing to pay more higher prices as long as there's personalization options. They want to see that individuality in their cars.
And at that level, they'll pay up for it. And the question is, does it end? When does it end? It seems like it's unending, but I think at a certain point, when do customers say, you know what? I'm not going to get that cross-stitch leather, right? I'm going to go for the standard leather. So we'll see.
BRAD SMITH: It's kind of just like-- if you had $1,000,000 to go buy a car, you're probably still going to have $1,000,000 to go buy that car. And you're going to go get the car. And you're not going to care about the cross-stitch leather.
PRAS SUBRAMANIAN: Yeah. Yeah, exactly.
BRAD SMITH: All right.
RACHELLE AKUFFO: Plus, you get an excuse to say "Purosangue" every two seconds.
Like a special person in the room. I'm not mad at that, Pras. I should make that a drinking game.
Our very own Pras Subramanian. Thank you so much.