Ferrari’s Not-So-Secret Strategy: Less Is More
Not just anyone can buy a Ferrari. The Italian sports-car maker has long aimed to foster its image of exclusivity by selling fewer cars than the market demands. It’s a strategy that limits sales growth but shields Ferrari from booms and busts.
Ferrari stock is up nearly 43% year to date to $484. In a recent note, J.P. Morgan says the stock could hit $525 by next December. Ferrari’s strength contrasts with other luxury car brands, including Mercedes, BMW, and Porsche, slowed by weak Chinese demand. Ferrari sells less than 10% of its cars in China, notes J.P. Morgan, sacrificing potential growth to maintain exclusivity. As founder Enzo Ferrari famously said, “Ferrari will always deliver one less car than the market demands.”
Ferrari sells only about 14,000 cars a year. Profit growth comes from improving margins, with some new models selling for 20% to 30% more than previous versions. Ferrari customers don’t seem to mind, and unmet demand makes it easy for Ferrari to shift deliveries from China to other markets.
That said, Ferrari shares trade at 58 times earnings, just below Tesla’s 62 and an order of magnitude above Mercedes-Benz Group
at five. “In one indication that the pace of innovation had begun to accelerate, Ferrari has filed more patents in the last three years than in its first 74,” notes J.P. Morgan. But patents won’t save Ferrari if the next generation of car enthusiasts are more interested in computing power than big, loud engines.