Ferrari's luxury game plan takes on Trump's auto tariffs
Luxury automakers like Ferrari (RACE) may be insulated from tariff-fueled price hikes due to their ultra-high-net-worth (UHNW) clientele, but even those well-heeled buyers may have their limits.
Typically, UHNW buyers aren't dissuaded by price hikes; when demand for a product is strong or in limited supply — for instance, during the pandemic — they are willing to pay premiums for products like Rolex watches, fine scotches, and of course, Ferrari sports cars.
It's why Maranello-based Ferrari didn't decrease or fully withdraw its profit guidance for the year during its latest earnings report. The Italian automaker did say, however, that profit metrics like EBIT and EBITDA margins could see a potential 50 basis point hit, depending on how President Trump's trade war plays out, though the possibility of 'offsets' in operations may diminish the impact, management said. Currently, foreign auto imports are subject to 25% tariffs.
In response, Ferrari's pricing strategy is noteworthy and two-fold.
For its ultra-premium cars like the $1 million+ Daytona SP3, upcoming F80 hypercar, and the new 12Cilindri coupe, the company will hike prices by a maximum of 10%. The thinking is these buyers will at least pay some of the tariff — in some cases, an additional $100,000 — because this 'marginal' amount won't dissuade them from a purchase of a limited-edition Ferrari. All buyers of these highest-end Ferraris are multi-repeat clientele and generally don't balk when Ferrari comes asking.
For Ferrari's lower-priced cars, such as the Roma coupe, 296 sports car, and SF90 hybrid sports car, the company will hold prices steady. The thinking here is that these buyers are more price sensitive, and Ferrari faces more competitors in the space, including Aston Martin (ARGGY), Bentley (VWAGY), and Ferrari's regional rival Lamborghini (VWAGY).
Ferrari's CEO Benedetto Vigna says his clients appreciate two aspects of Ferrari's pricing strategy.
'No. 1, we've been clarifying right away what we intend to do; and two, that we contribute, OK? We contribute to this price increase,' Vigna said on Ferrari's analyst call on Tuesday, citing talks he's had with customers.
'We don't ask them to pay all the bill, but we were very clear telling [them] that some models will have no price increase, some others up to … a maximum 10%. So they appreciate it a lot.'
Vigna said the company will remain 'vigilant' in response to changes in purchasing behavior, but at the moment the company hasn't seen any shift post-tariffs.
Lamborghini also reported stellar first quarter results, though it noted the 'uncertain' background in international trade remains. The company said it will 'closely monitor the situation and evaluate potential future scenarios and implications for its business,' but at the moment, business remains robust with a 'strong order book' of future sales.
A spokesperson for Lamborghini said the automaker would not discuss pricing at this time, other saying the automaker was "carefully evaluating all possible scenarios."
Compared to Q1 last year, both Ferrari and Lamborghini did quite well, with revenue up 13% and 30%, respectively, as well as 23% and 33% growth in EBIT.
One area that Lamborghini highlighted is the strength of its key commercial regions — the Americas, EMEA (Europe & Middle East), and Asia — which allows it to spread the risk of trade tensions, though the US is still its top market.
Like Lamborghini, Ferrari has a strong presence across a number of key regions, with a big wrinkle in its favor: a smaller dependency on China. Lagging China sales have hit other luxury brands, including Mercedes, BMW, and Audi.
Wall Street is onboard with Ferrari's game plan for fighting tariffs and limiting China exposure.
Morgan Stanley's Adam Jonas reiterated the bank's Overweight rating on the stock, citing Ferrari's 'uniquely positioned, defensive business' with an order book extending well into 2026, relatively low volatility to earnings, and strategic regional exposure, for example, low China risk.
'We are not aware of any other global luxury brand with anywhere near as low exposure to China as Ferrari,' Jonas wrote. 'We believe the company's strong pricing power (ultra-premium luxury consumer) and low exposure to China (1Q Greater China shipments represented 6.6% of total shipments) offer relative safety vs. many other names under our coverage.'
A high-net-worth consumer, low exposure to China, and a surprisingly 'defensive' business in an uncertain economic environment could be Ferrari's key to success.
'Despite the surge of the uncertainty and volatility, our indistinctive business model provides us with solid confidence and the necessary agility for our future,' Ferrari CFO Antonio Picca Piccon said during the earnings call.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on X and on Instagram.
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