The luxury sports car business is booming. Automakers are now globally incentivized to produce the electric and hybrid luxury vehicles the younger demographic demands.
Automakers built the first electric cars alongside combustion engines in the early 1800s, but the 21st century has brought a resurgence of these types of engines. So much so, that Lamborghini, the Volkswagen Group-owned sports car manufacturer, has made a 10-figure commitment to producing electric and hybrid vehicles over the next five years. It plans to launch plug-in hybrids in 2024.
Paolo Poma, CFO of Lamborghini, is on the front lines of the change. He and his team are adjusting to the change through a confident approach, new forms of data analysis, and taking advantage of all the learning opportunities that arise. Like many other companies, talent issues are a recurring problem for Lamborghini. As the company shifts towards a focus on performance, electrification, and sustainability, it is in need of people who can skillfully gather, analyze, and forecast using data within these new environments.
CFO, Automobili Lamborghini
This interview has been edited for brevity and clarity.
PAOLO POMA: This is a major challenge, not just for Lamborghini, but for our entire industry, because of what you mention, as well as regulatory reasons. The main challenges in our initiative are regulatory issues, which can result in huge penalties if not met. However, we are in a good position because most of our customers are about or below 40 years old, and they are more sensitive to sustainability.
Back in 2015, we reached climate neutrality in our facilities. Now, we are getting into the sustainability of the product, a €2.5B investment in five years, fully self-financed, toward electrification. By the beginning of 2025, we will be the first player in our market to be fully hybridized.
Expectations are that cool electric cars will show up in the second part of the decade, so our customers are looking forward to having sustainable products. We are giving them these options by cutting 50% of CO2 emissions by the end of 2024 and by 80% with the introduction of electrification.
POMA: We are always following global wealth or richness to identify these patterns. So, we follow the concentration of the rich and thank God, that number is growing at the base of 7% compounded annual growth in the last 15 years. This is our main trigger. I don’t see major changes in the budget for these groups of people.
Infrastructure availability in many places will also drive the implementation of not only mass-market cars but also our versatile, one-of-a-kind cars.
POMA: On the one hand, we have a unique opportunity if we talk about the possibility of electrification further increasing our profitability. In these discussions, we are both financially wise and optimistic for the future, because we are confident in the combination of electrification with performance for our vehicles.
Internally, we will adapt our teams to the changes, because they have to cope with the implementation of electrified products. This means new kinds of projects. Our teams need to have knowledge of the new components to work and communicate with our development engineers. They need to have a good understanding while finding a good compromise between performance and cost. But I see that as an opportunity, not as a challenge or threat.
POMA: You touch on the major challenge that we’re going to face in the implementation and execution of the shift to hybridization and electrification. We have been growing dramatically as a company. Lamborghini 10 years ago was a $200 million company. Last year, we broke the two billion threshold [in revenue].
It’s not just about finances, but the competency to execute. So the talent issues are caused by a lack of competencies in the market, making it harder and harder to find talent. With our fast growth, this has been a serious problem for us.
We are seeing issues in two major areas, one of which is under my control — IT. We need more people able to leverage new technologies. This is something that is again, a challenge for us, because leveraging new technologies and creating new use cases [and] new opportunities for revenue streams in the future are very important.
The second one is product development. Those teams are moving more from mechanical challenges to electrical, technological, and digital development challenges. So, we need technical people in cybersecurity, electronics, and product development. That means having an exceptional team of data scientists that can leverage our large collections of data.
Being able to create use cases and leverage the data is getting really important, and these kinds of skills lacking in the labor market are becoming more difficult to hire. To remedy this, we are working directly with many universities to describe to them the type of skills we need from future employees.
POMA: There are definitely factors that are positively impacting our business. First, the concentration of wealth in the world right now is growing our customer base. The second factor is the larger spending habits of high-net-worth individuals after COVID, and [the] third is the overall strength of the US dollar, given the fact that the whole luxury business is very much concentrated on the U.S. as the main market.
I don’t see the behavior of rich people or the concentration of their wealth changing anytime soon. The strength of the US dollar might decrease in the future, and that is a potential pain point for us. Geopolitically, we are being impacted by the decoupling between China and the U.S., because the U.S. is the main market for us, and China is our second-best market. This will make it difficult to do business in both places as time goes on. Further tension between China and the U.S. will make it more difficult to access our two top markets.
POMA: I did not come from a traditional CFO background, like from the Big Four of accounting or something similar. I’m an engineer, and I’m coming from operations. I decided to join an MBA program, which I strongly suggest to aspiring financial leaders. The MBA was significant for me in my career.
I worked for McKinsey, and that was another very important step. Being a CFO, it’s very important to be a partner in the business, so understanding the business as a whole is crucial. I would strongly suggest to colleagues or other financial leaders that are eager to join bigger companies to continue to cherish the learning process.
I am attending a course at Harvard after this, one day in New York right up to Boston because you never stop learning.