The Prancing Horse That Defies Economic Gravity

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Introduction

Yesterday morning, Ferrari $RACE ( ▲ 1.8% ) released its earnings. I’m fascinated with Ferrari because I’m amazed at how resilient the luxury automaker has been amid a downturn in luxury goods spending.

During the pandemic, stocks like $LVMUY ( ▲ 2.32% ) were darlings and now, they’re struggling. The conversation around LVMH and other luxury goods stocks back then was that they were always a great place to invest in because demand is consistent, and the rich rarely change their buying patterns throughout the business cycle. But last year, luxury spending had one of its worst years since the Great Recession. Bain, one of the Big 3 consulting firms, predicts luxury goods spending won’t recover until 2030.

While the sale of yachts, watches, handbags, private jets, jewelry, designer clothes, and fancy real estate has fallen, Ferrari continues to see growth. In their earnings report, Ferrari noted that their order book will keep them busy for the entirety of 2026 and demand for their vehicles continues to be strong.

Ferrari’s Q1’25 Earnings Review

When you compare Q1’24 to Q1’25, you’ll find that Ferrari sold 33 more cars but was able to achieve a €206M increase in net revenue and €299M increase in free cash flow. As much as we’d like to think all that growth was from selling 33 more vehicles, the reality is that €52M in revenue growth came from an increase in sponsorship and financial services revenue. The remaining €154M came from the sale of cars and spare parts.

The average annual maintenance cost for a Ferrari is between $1,500 and $2,000. Considering the number of vehicles Ferrari has shipped over the past several years, and the fact that over 90% of their vehicles are still on the road today, it would make sense that a significant portion of the €154M in car parts and car sales revenue would be in car parts alone.

How is Ferrari doing better than everyone else?

Within the same time period, Porsche saw a revenue decline of 1.7% around the same period with a 7.9% drop in shipment volume.

And Aston Martin saw a revenue decline of 13% within the same period while having an increase in shipment volume of 1%.

So the big question is, how is Ferrari doing much better than its luxury peers, especially in the exotic car market? It’s because Ferrari chose to prioritize exclusivity. During the Great Financial Crisis, the waitlist for a Ferrari was under two years, which is unheard of when the automaker is known for having longer wait times. And Ferrari chose to keep customers waiting, even if it meant keeping sales flat during the time. Doing this helps Ferrari maintain its exclusivity as a brand while giving itself just enough work to get through a downcycle and slowly capitalizes on increasing demand during the upcycle. It’s smart for many reasons.

For one, building a brand is tough to build but easy to destroy. Look at Gucci, they got greedy during the good times, to where they expanded to more outlet malls and offered more discounts to consumers. Hence why Gucci isn’t a luxury symbol like it once was. Or Cadillac, which once had too many dealers. By maintaining exclusivity, Ferrari is preserving their brand as an iconic luxury exotic automaker.

Second, by maintaining a waitlist that keeps itself busy during economic downturns, Ferrari has eliminated the costly problem of excess manufacturing capacity that plagued many automakers during downturns. From a financial perspective, this predictable production schedule enables precise inventory management, optimal workforce utilization, and steady cash flow forecasting, which together significantly reduce operational risk.

In a way, maintaining a waitlist throughout all business cycles helps make Ferrari vehicles an appreciating asset. Those who really want a Ferrari, even when times are slow, will either need to pay a premium in the used exotic car market or wait a few years to get their dream vehicle produced. Or they can rent them out for a day or more at a hefty markup to an exotic car rental business. By ensuring that their vehicles remain an appreciating asset, Ferrari can continue to have pricing power on their new and upcoming vehicles and maintain their profit margins both in good and bad times. This comes in handy, especially in times like this when tariffs could potentially eat into their margins.

The Move to Electric

For the bigger picture, one needs to recognize that Ferrari is going electric. Their internal combustion engine (ICE) is what makes up the bulk of its history. The engines give it a unique sound that an electric motor can’t make. The way that ICE engines are integral to Ferrari’s brand is how ICE engines are integral to fans of the Dodge Challenger, and why many aren’t fond of Dodge’s move to go electric.

Knowing that Ferrari vehicles cost a lot in annual maintenance, and electric vehicles tend to have less maintenance costs, it would be understandable why future Ferrari owners would want an exotic electric sports car. Plus, the electric motor can provide performance enhancements that an internal combustion engine can’t.

With the additional space available with an electric engine, Ferrari has new opportunities for customization, primarily because electrification frees up space previously occupied by internal combustion engines and their components. With more space in both the front and rear of the car, designers can reimagine the interior layout with greater flexibility, enabling larger or more versatile frunks, expanded cargo areas, and hidden compartments that were impossible before.

For Ferrari’s discerning clientele, this means bespoke, brand-matched luggage and modular storage solutions tailored to individual lifestyles, whether for track days, travel, or leisure activities. Moreover, the absence of bulky mechanical parts allows for more personalized cabin features, such as unique seating arrangements, premium materials, and advanced tech integrations, enhancing comfort without compromising performance.

Ferrari can even showcase its cutting-edge electric technology as a design element, turning components into customizable visual highlights. Overall, electrification removes packaging constraints and empowers Ferrari to elevate its legendary exclusivity and personalization, appealing to both traditional enthusiasts and new buyers seeking a blend of luxury, performance, and practicality in a high-end electric supercar.

Sure, Ferrari gets less money in spare parts sales, but Ferrari can make more money from the initial sale of the vehicle.

Conclusion

Ferrari's journey from a racing team to a luxury powerhouse offers a masterclass in business resilience. While other luxury brands chase volume and accessibility during good times only to suffer during downturns, Ferrari has engineered scarcity into its DNA.

As the company navigates the electric transition and the recent tariff situation, it does so from a position of unprecedented strength, with order books filled through 2026, pricing power intact, and a brand that appreciates rather than depreciates with time.

What makes Ferrari exceptional isn't just the engineering marvels that leave its Maranello factory, but the business model that defies economic gravity. In a world where luxury brands rise and fall with economic tides, Ferrari has built something rarer than any of its limited-edition supercars: a business that accelerates through headwinds while competitors pump the brakes.

For investors seeking shelter from luxury's storm, the prancing horse continues to offer not just a thrilling ride, but one that maintains its value long after the checkered flag falls. Perhaps the most valuable asset Ferrari produces isn't found in its garages or showrooms, but in its balance sheets and the way people perceive the brand, proof that sometimes, making customers wait is the surest path to sustainable success.

Disclaimer

About Me

I am an independent personal finance writer and blogger. I do not have any formal training or certifications in finance, but I have a deep passion for the subject and have been researching and writing about personal finance topics for several years.

Disclaimer

The information provided in my articles is for educational and informational purposes only. It is not intended to be a substitute for professional financial, investment, or tax advice.

I encourage you to do your own research, consult with a licensed financial advisor, and make decisions that are best suited to your individual financial situation and goals. I cannot guarantee any specific outcomes or results from following the advice in my articles.

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We own RACE both directly and indirectly through ETFs.