As the electric vehicle revolution slows, Ferrari enters the race

Gliding on robot trucks, a row of Ferrari chassis moves through a gleaming new factory in northern Italy. At each station, engineers in cherry red uniforms add a component—an engine block, a dashboard, a steering wheel—as they transform the bodies into hybrids. Coming soon: fully electric.

There’s a lot at stake in Ferrari’s €200 million “e-building,” which went online last month and is nearly twice the size of Rome’s Colosseum. The factory is set to bring the 77-year-old sports car maker, known for the sonorous roar of its gas engines, into the age of electrification.

But the effort comes at a precarious time for the auto industry. The transition to electric vehicles, which should have quickly ushered in an era of climate-friendly transportation, has instead been held back by costly investments and slowing global demand.

Other luxury carmakers have struggled to go electric. Mercedes-Benz and Lamborghini have scaled back their ambitions. Tesla reported a second-quarter sales decline on Tuesday, and Ford Motor said in April it would shift production to more hybrids as EV losses pile up. A growing trade war between China and the West also threatens to stifle growth.

Despite the challenges, Ferrari sees opportunity in the industry’s inevitable march toward electrification to reach a new consumer: the wealthy environmentalist. It plans to unveil its first all-electric model in the fourth quarter of next year. As part of its strategy, the automaker has enlisted LoveFrom, the agency founded by former Apple design chief Jony Ive and industrial designer Marc Newson, to refine the car’s look.

There’s a lot of mystery surrounding the yet-to-be-named car, including how long it will last and what it will sound like. The company hasn’t revealed how it will look, how much it will cost, or how much it will cost. But it could be one of the most expensive electric vehicles on the market, analysts say, surpassing Porsche’s $286,000 Taycan Turbo GT.

Ferrari's foray into electric will be noteworthy for other reasons. Regulators may push for electric vehicles, but there is lingering skepticism in the market. Winning over combustion engine fans will not be easy, even for Ferrari. And the industry is desperate for a carmaker, Anyone car company, to demonstrate that electric vehicles can generate big profits.

“It’s worth seeing if a Ferrari EV can maintain the kind of premium you’d associate with a Ferrari,” said Martino de Ambroggi, an auto analyst at Equita, an investment bank in Milan. “Often, buying a Ferrari is also seen as a kind of investment. Only after a few years will we see whether that investment in an electric Ferrari holds up.”

Ferrari CEO Benedetto Vigna is doing his best to keep the market on hold. In an interview last month at the new plant, he said the company would begin full-scale production of electric vehicles by early 2026. By 2030, electric and hybrid cars will account for up to 80 percent of Ferrari’s annual production as the company seeks to meet stringent European Union emissions mandates.

In the meantime, the electric building will launch two models: the SF90 Stradale, a plug-in hybrid, and the Purosangue with a combustion engine.

Ferrari doesn’t need an electric vehicle to boost its profits. Under Mr. Vigna, a former executive at chipmaker STMicroelectronics who took the helm nearly three years ago, the company has done great. The stock is one of Europe’s best performers this year, with a market valuation of about $75 billion, more than Ford or General Motors. Profits are soaring along with prices at Ferrari, which makes some of the most expensive cars on the planet. There’s a three-year waiting list for some models.

Ferrari’s success over the years on the Formula 1 track has also led to a lucrative corporate sponsorship and merchandising business that has transformed it into a luxury brand with a sporty edge. Ferrari’s prancing horse logo can be found on high-end clothing such as a €790 cashmere sweater.

Mr. Vigna sees the electric vehicle as part of the company’s growth strategy, despite the industry slowdown. “There are some potential customers, I can see them, that will never become part of the family if there is no electric car,” he said.

But challenges loom. Enthusiasts gathered outside the factory gates last month wondered: Will it look, handle and sound like the classic Ferrari growler, or will it have the understated wail of most electric vehicles?

“When you think of a Ferrari, you still have that kind of engine feel, and you also think of the roar,” Mr. de Ambroggi said. “I don’t know how Ferrari solves that problem.”

Mr. Vigna often receives this question, especially from long-time customers, or Ferraristi.. They appear to be inspired by the late founder, Enzo Ferrari, who once explained in the simplest terms how he built some of the fastest cars on the planet: “I build engines and attach them to wheels.”

Mr. Vigna’s EV pitch sounds different. “The electric motor will not be silent,” he said. “There are ways to make sure that the thrill you get from driving an electric Ferrari is the same as when you drive a hybrid or a Ferrari combustion engine.”

Battery life is another piece of the puzzle. Since Ferraris often sell for a premium on the secondary market, concerns about battery degradation and its impact on the car’s long-term value may be felt more acutely by Ferraristi.

“The transition to electric vehicles raises a lot of new questions in terms of vehicle maintenance,” said Stephen Reitman, automotive analyst at Bernstein.

SK On, a South Korean battery manufacturer and historic partner of Ferrari, will supply the components for the electric vehicle batteries, which Ferrari will assemble in the e-building, where it will also manufacture the car's electric motors and axles.

And then there’s the question of price. Last month, Reuters reported that the car would cost at least €500,000 ($540,000). Mr Vigna dismissed the speculation, saying it was too early to talk about price.

Ferrari still follows its founder's principle of producing a limited number of extremely expensive cars. Ferrari produced less than 14,000 of them last year; even with e-building, production is not expected to increase much at first.

The limited number of enthusiasts may explain why they make pilgrimages to Maranello in the hopes of catching a glimpse of a Ferrari, whether on the company’s Formula 1 test track or near its red-brick factory.

Knowing that demand is high, Mr. Vigna has raised the base price of most models by more than 25 percent.

“Ferrari consistently undersells the market, which leads to a multi-year backlog,” said Mr. Reitman, the Bernstein analyst. With a profit margin of nearly 30 percent, Ferrari's business more closely resembles that of a luxury brand like Hermes or Rolex, analysts say.

Mr. Vigna is already thinking about how to market the new electric car. The target customer probably won’t buy the car for purely practical reasons or even to save the planet, he said, adding: “The emotional part of the brain is driving the purchase.”

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