What's going on?

Goldman Sachs changed its recommendation on Ferrari�s stock from a buy to a sell on Monday, and the Italian car company�s eco-friendly ambitions might be the reason it runs out of juice.

What does this mean?

Ferrari�s negotiating a new stretch of track at the moment: the legendarily gas-guzzling auto giant recently announced the development of its first-ever all-electric vehicle (EV) and appointed a new, tech-savvy CEO. But according to Goldman Sachs, this shift in focus could be costly for investors in the short term.

The investment bank agrees a push toward EVs is important for Ferrari�s future, but it reckons the costs involved � an extra $50 million a year of spending between now and 2030 � will put a significant dent in the company�s profitability. In a rare reversal of fortunes, that prompted Goldman to downgrade its recommendation for Ferrari�s shares straight to a sell.

Why should I care?

The bigger picture: Ferrari isn�t alone.
The EV transition has made carmakers some of the highest-spending companies out there right now: they�ve collectively spent more on research and development over the last decade than they�ve made in profit, according to Bloomberg. And all that new tech won�t necessarily pay off: Jaguar Land Rover-owner Tata Motors, for example, recently wrote off over $1 billion worth of previous research spending.

For markets: Beware electric shocks.
The combined global market value of carmakers� stocks doubled to more than $2 trillion in 2020, despite a stall in overall car sales. But investment firm Research Affiliates thinks shareholders are deluding themselves: almost all automakers� stock prices have benefited from exciting EV developments, even though many are direct competitors. That means some of them are bound to lose out. Investors got a sharp reminder of that on Monday: electric truck maker Lordstown Motor’s shares slumped after its top two executives resigned, days after the firm warned it was on the verge of running out of cash.