Ferrari NV announced that soaring commodity prices would begin affecting the prices of its new supercars. The average cost for an Italian supercar, made by Ferrari, is between $200k-$400k, making it one of the most expensive production automobiles globally (besides French supercar maker Bugatti).
During a 60-minute earnings call with investors on Wednesday, Ferrari discussed better-than-expected fourth-quarter earnings as shipments jumped during the pandemic. However, the company explained that rising commodity costs would result in continued supercar inflation this year.
Susy Tibaldi, a luxury analyst at Swiss bank UBS, asked Antonio Picca Piccon, the CFO of Ferrari NV, since inflation remains persistent and 2021 was the first time the company increased prices by 2% due to inflation, "should we expect something similar in 2022?"
Piccon responded, there "is some pressure on the energy on the aluminum cost and we will apply this price increase to consider for that, but we will also leverage."
"Other important levers when it comes to the pricing of the new model and selected. I mean a price increase of selected model and also the personalization. So this is an important factor we have factoring in Susy," the CFO added.
Rising aluminum cost stems back to Europe's winter of discontent as rocketing power prices across the region shuttered four aluminum smelters which curtailed about half a million tons of annual capacity. European aluminum prices have surged more than 350% since the pandemic low in early 2020 to about 450 euros per ton.
Ferrari uses a lot of aluminum, especially for its frames, engines, transmissions, body, suspension, paneling, and rims. The surge in prices will be pushed to the consumer as the company locks in about $155.5k profit on average per car this year.
Slumping Ferrari shares seems to correlate with surging aluminum prices that would crush margins and reduce the stock's attractiveness.
While, of course this doesn't necessarily imply causation - and we suspect the elasticity of demand for Ferrari is minimal - expectations for further increases in commodity costs (along with rising interest rates) will pressure the supercar maker's bottom line.