Ferrari's Price Hike: A Strategic Move Amid U.S. Tariffs

Ladies and gentlemen, buckle up! Ferrari is making a bold move in response to the U.S. tariffs, and it's a game-changer for the luxury sports car market. The Italian powerhouse has announced that it will raise prices on certain models by up to 10% starting April 2, 2025. This isn't just a price hike; it's a strategic maneuver to navigate the treacherous waters of international trade politics.



Ferrari's decision to absorb the cost of tariffs for some models while passing on the cost to others is a masterstroke. The company is shielding its customers from the brunt of the 25% tariffs by absorbing the cost of higher import duties on certain models, such as the 296, SF90, and Roma. This means that the commercial terms for these models will remain unchanged, regardless of the import date. Ferrari is essentially saying, "We've got your back, loyal customers!"

But here's the kicker: for models like the Purosangue and the 12Cilindri, Ferrari is passing on the cost with price increases of up to 10%. This differential pricing strategy is a brilliant move to maintain the exclusivity and premium positioning of its brand. By absorbing the cost for some models, Ferrari can maintain its image as a luxury brand that values its customers, while the price increases for other models can help offset the financial impact of the tariffs.

Now, let's talk about the impact on Ferrari's market share and customer base in the United States. Ferrari's affluent clientele, who are generally wealthy enough to absorb the price hikes, are unlikely to be significantly deterred by the price increases. The company reported a net profit of €1.5 billion in 2024, up 21.3% from the prior year, and its operating profit margin stood at 28.3%, reflecting a 7% year-on-year increase. The company expected revenue of more than €7bn for 2025, or a 5% growth from last year. The profit margin was forecasted at 29% this year, up from 28.3% in 2024. "A 50 basis points reduction" would therefore still leave it slightly more profitable than last year. Ferrari’s share prices hit by Trump’s tariffsFerrari’s share price rebounded from a session low and finished 1.82% higher at €391.5 per share on Thursday, contrasting with broader declines in other European auto stocks. However, the Italy-based carmaker’s stocks are still down 4.6% this year amid US-EU trade tensions. Its stocks declined nearly 20% after reaching an all-time high on 18 February. Ferrari’s biggest shareholder, Exor, sold 4% of its holdings, or 7 million shares, in late February, triggering a selloff in the carmaker’s stock. Trump’s tariff threats and subsequent actions have further pressured the share price. The United States stood as Ferrari’s biggest single market, accounting for about one-quarter of its total sales. In 2024, the company shipped 13,752 vehicles worldwide, with 3,452 units exported to the U.S. The sales rose 6% year-on-year to the country, the highest increase among all regions. A broad decline in share of European carmakersShares of major European car manufacturers fell broadly following Trump’s auto tariff announcement on Thursday, with the Euro Stoxx 600 Automobiles & Parts index declining 2.4%. The Netherlands-based Stellantis saw its shares drop 4.3% to their lowest level since October 2022. German carmakers, including Mercedes-Benz, Volkswagen, Porsche, and BMW, all fell between 2% and 3%. European Commission President Ursula von der Leyen responded in a statement on Wednesday, expressing deep regret over the US decision to impose tariffs on European automotive exports. She also reiterated that the European Union would “continue to seek negotiated solutions while safeguarding its economic interests".

Ferrari's decision to absorb the cost of duties for certain models indicates a strategic move to protect its high-end clientele from the full brunt of the tariffs. This approach is likely to maintain customer loyalty and market share among those who prioritize exclusivity and performance over cost. For example, the Purosangue, which starts at about $430,000, will see a price hike of about $43,000, while the limited edition F80, starting at more than $3.5 million, will see an increase of more than $350,000. These price increases, while significant, are unlikely to deter Ferrari's affluent customers, who are accustomed to paying premium prices for luxury and performance.

In summary, Ferrari's decision to selectively raise prices in response to U.S. tariffs is likely to have a minimal impact on its market share and customer base among its affluent clientele. The company's strategic approach to absorbing costs for certain models and passing on only partial increases for others demonstrates a commitment to maintaining customer loyalty and market position in the U.S. market.



So, what does this mean for investors? Ferrari's stock has been on a rollercoaster ride, but this move shows that the company is taking proactive steps to mitigate the impact of the tariffs. The stock rebounded from a session low and finished 1.82% higher at €391.5 per share on Thursday, contrasting with broader declines in other European auto stocks. However, the Italy-based carmaker’s stocks are still down 4.6% this year amid US-EU trade tensions. Its stocks declined nearly 20% after reaching an all-time high on 18 February. Ferrari’s biggest shareholder, Exor, sold 4% of its holdings, or 7 million shares, in late February, triggering a selloff in the carmaker’s stock. Trump’s tariff threats and subsequent actions have further pressured the share price. The United States stood as Ferrari’s biggest single market, accounting for about one-quarter of its total sales. In 2024, the company shipped 13,752 vehicles worldwide, with 3,452 units exported to the U.S. The sales rose 6% year-on-year to the country, the highest increase among all regions. A broad decline in share of European carmakersShares of major European car manufacturers fell broadly following Trump’s auto tariff announcement on Thursday, with the Euro Stoxx 600 Automobiles & Parts index declining 2.4%. The Netherlands-based Stellantis saw its shares drop 4.3% to their lowest level since October 2022. German carmakers, including Mercedes-Benz, Volkswagen, Porsche, and BMW, all fell between 2% and 3%. European Commission President Ursula von der Leyen responded in a statement on Wednesday, expressing deep regret over the US decision to impose tariffs on European automotive exports. She also reiterated that the European Union would “continue to seek negotiated solutions while safeguarding its economic interests".

Ferrari's differential pricing strategy could affect its brand perception and long-term financial health in several ways. On one hand, absorbing the cost for certain models could enhance Ferrari's brand perception as a customer-centric luxury brand. This is particularly important given that Ferrari's biggest market is the U.S., which accounted for a quarter of shipments last year. On the other hand, passing on the cost to other models could potentially affect sales, as higher prices might deter some customers. However, given Ferrari's strong brand and the high demand for its vehicles, the impact on sales might be minimal. This is supported by the fact that Ferrari has an order book covering the entirety of 2026 fueled by order intake for its 12Cilindri models.

In terms of long-term financial health, Ferrari has maintained its financial targets for 2025, but warned of a potential 50 basis-point reduction to its earnings before interest and tax, and earnings before interest, tax, depreciation and amortization margins. This suggests that while the tariffs will have some impact on Ferrari's financial performance, the company is confident in its ability to manage the situation and maintain its financial health in the long term. This is supported by the statement: "Ferrari maintained its financial targets for 2025, but warned of a potential 50 basis-point reduction to its earnings before interest and tax, and earnings before interest, tax, depreciation and amortization margins."

So, what's the bottom line? Ferrari's price hike is a strategic move to navigate the complexities of international trade. The company is absorbing the cost for some models to maintain customer loyalty and market share, while passing on the cost to others to offset the financial impact of the tariffs. This differential pricing strategy is a brilliant move that showcases Ferrari's commitment to its customers and its brand. Investors should take note of this strategic maneuver and consider the long-term implications for Ferrari's stock. This is a company that knows how to play the game, and it's a no-brainer to keep an eye on Ferrari as it continues to navigate the challenges of the global market.