Ferrari’s business operations demonstrate remarkable strength, with the company generating exceptional margins in the automotive industry and showing resilience to economic downturns. The luxury automaker’s near $4 million vehicles have already sold out, highlighting its strong pricing power. One area where Ferrari has faced challenges is in China, where sales dropped 25% in the first quarter to their lowest level in nearly four years. This decline is attributed to a shrinking luxury car market in China due to economic uncertainty and weak consumer sentiment.
However, Ferrari is poised to adapt to the changing market landscape by introducing its first fully electric supercar, dubbed Elettrica, in October. This move is strategic, as China is shifting its focus towards electric vehicles (EVs). Ferrari already sells roughly half of its vehicles as hybrids, positioning the company well for this transition. The Elettrica is expected to benefit from lower tariffs and taxes, with a compound tax rate of 30% compared to nearly four times that rate for its 12-cylinder engine vehicles.
Ferrari’s Growth Strategy
Ferrari will launch the Elettrica through a three-step process. The company will showcase the ‘technological heart’ of the new EV at its capital markets day on October 9, followed by a world premiere in the spring of 2026, and sales will commence in October 2026. This strategic rollout could lead to increased growth for Ferrari, particularly in China, where the company has historically limited sales to around 10% of its total. The potential for higher profitability with the Elettrica due to lower tariffs and taxes might lead to a revision of this cap.
In addition to the Elettrica, Ferrari’s upcoming $3.8 million F80 supercar is expected to deliver a significant earnings boost. According to Barron’s, this could potentially drive Ferrari’s shares up by another 30%. The F80 exemplifies the company’s strong pricing power, with analysts suggesting that its margins could be high enough to generate 20% of the company’s profit from just 2% of units sold.
Ferrari has emerged as a top-performing stock in the automotive sector, outperforming the broader S&P 500 index over the past three years. With its dream-worthy products, impressive margins, and pricing power, along with room for growth, Ferrari is well-positioned for continued success. The successful launch of its first fully electric EV in China could be another significant win for the company.
