Ferrari Rides Formula 1 Success To Record Sales
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Ferrari Rides Formula 1 Success To Record Sales
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Formula 1 is Ferrari’s strongest marketing channel by far, and the Italian sports car manufacturer appears to be benefitting financially from a return atop the F1 grid.
The 75-year-old sports car manufacturer based in Maranello, Italy, reported second-quarter earnings this week, handily beating analyst expectations and raising full-year 2022 guidance along the way.
Ferrari Q2 2022 Earnings Highlights
Total Shipments: 3,455 cars (up 29% from Q2 2021)
Net Revenue: $1.3 billion (up 25% from Q2 2021)
Operating Profit: $330 million (up 18% from Q2 2021)
Ferrari’s net revenue and operating profit were quarterly records, and here are a few additional charts I found interesting from their Q2 Investor Presentation.
But while the luxury car manufacturer is setting quarterly records and shipping more cars than ever before, its stock price ($RACE) is down more than 20% from its all-time high in November 2021. Still, Ferrari’s equity is up nearly 100% over the last five years, compared to just 65% for the S&P 500 over the same time period.
Ferrari is one of my favorite case studies in sports/business because they are the epitome of a luxury car brand. They don’t spend any money on traditional advertising; instead, they put hundreds of millions of dollars each year into the Scuderia Ferrari F1 racing team.
Why? Because they know if they build a fast car and their drivers are competitive during Grand Prix weekends, hundreds of millions of people will see the Ferrari brand and desire their product. It’s the perfect marketing platform and has helped Ferrari build up a fanbase of over 400 million people worldwide.
But to be honest, these strong results shouldn’t be all that surprising. Sure, we knew Ferrari would be more competitive in F1 this season—they put significant resources towards the 2022 regulation changes—but I think this is more about their customer base and the underlying dynamics of their business.
Companies like Toyota, GM, Honda, and Ford will sell a combined 20 million-plus vehicles this year. But as a luxury car manufacturer, Ferrari has a different model. They intentionally limit the supply of their cars and typically only ship about 7,000 to 10,000 vehicles annually.
Ferrari Annual Shipments
2011: 7,195
2012: 7,405
2013: 7,000
2014: 7,255
2015: 7,664
2016: 8,014
2017: 8,298
2018: 9,251
2019: 10,131
2020: 9,119
2021: 11,155
Specifically, this limited-supply model has benefitted Ferrari over the last couple of years. Because while it’s true that a global pandemic (and now recession) has rocked the economy to its core, Ferrari is still perfectly positioned to thrive.
They only ship a few thousand cars each year and give customers just a handful of models to choose from, so the luxury car manufacturer has largely avoided the supply chain disruptions that have forced larger automakers to pull back on production.
And while many people have seen their savings, brokerage accounts, and 401k’s nosedive over the last several months, Ferrari’s customer base is mainly comprised of uber-wealthy individuals. So keep in mind, with the world’s 2,755 billionaires increasing their cumulative wealth by $5 trillion last year, Ferrari’s customer base didn’t contract — it expanded.
“In Q2 we reached a new record in terms of net order intake, which is astonishing considering that in the quarter the books were open only on three models of Ferrari…This strong trend is visible all over the world in no specific geographical pattern,” says Ferrari CEO Benedetto Vigna.
So while Ferrari competitors like McLaren have turned to capital markets to raise hundreds of millions of dollars to keep their business afloat, Ferrari appears to be winning, both on and off the track.
I hope everyone has a great day. We’ll talk tomorrow.
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