Ferrari's Q1 Surge and the Tariff Crossroads: Can the Prancing Horse Stay on Course?

Ferrari’s Q1 2025 results marked a triumph of premium pricing and strategic exclusivity, with revenue surging 13% to €1.8 billion and net profit jumping 17% to €412 million. Yet beneath the headline numbers lies a critical challenge: U.S. tariffs on European imports threaten to erode margins by up to 50 basis points. As the Italian marque balances its “quality over quantity” mantra with geopolitical headwinds, investors must weigh whether its electrification push and pricing discipline can sustain momentum.

Revenue Growth Defies Sluggish Shipments

Ferrari’s revenue growth outpaced vehicle deliveries, which rose a mere 0.9% to 3,593 units. This divergence underscores the power of its premium strategy:
- Premium Pricing & Personalization: Revenue from personalized vehicles and high-margin hybrids (e.g., SF90 XX) drove a 11.1% increase in automotive revenue.
- Brand-Driven Income: Sponsorship and commercial activities surged 32.1%, reflecting Ferrari’s growing reach in lifestyle and experiential markets.
- Geographic Shifts: EMEA deliveries rose to 47% of total shipments, while China’s share dropped to 7%, signaling a pivot toward markets less exposed to tariffs.

The Tariff Crossroads: Mitigation vs. Risk

The Biden administration’s proposed 30% tariff on EU car imports poses a critical test. Ferrari’s response? A 10% price hike on select U.S. models—adding up to €50,000—to offset costs. While this safeguards margins for newer models like the Purosangue, it risks alienating price-sensitive buyers in its largest market (30% of sales).

• Margin Impact: EBIT and EBITDA margins could shrink by 50 basis points, reducing 2025 EBIT to €2.03 billion (a 7% rise) and EBITDA to 38.3% of revenue.
• Client Loyalty: Pre-April 2025 orders and iconic models (e.g., Roma, SF90) remain unaffected, preserving relationships with high-net-worth buyers.

Electrification: The Long-Term Hedge

Ferrari’s 2025 roadmap leans heavily on electrification to future-proof growth:
- New Models: Six launches are planned, including the all-electric elettrica (October 2025 debut), which promises higher margins due to simplified production and tax incentives.
- Hybrid Dominance: Electrified vehicles already account for nearly half of shipments, with EBIT margins 200+ basis points above combustion-engine peers.

Strength in Cash and Orders

Ferrari’s financial health offers a buffer against uncertainty:
- Cash Flow: Industrial free cash flow nearly doubled to €620 million, fueled by disciplined capital spending (€224 million) and share repurchases (€424 million).
- Order Book: 2026 deliveries are fully booked, with a 32.1% jump in sponsorship revenue signaling enduring brand appeal.

Conclusion: A Brand Built for Turbulence

Ferrari’s Q1 results affirm its ability to monetize exclusivity, even as geopolitical risks loom. With a 30.3% EBIT margin (up from 27.9% in 2024), a near-doubled cash position, and a product lineup skewed toward high-margin hybrids/electrics, the company is positioned to navigate tariffs. While the 50-basis-point margin drag is a valid concern, its pricing power, geographic diversification, and electrification pipeline suggest resilience.

Investors should note that Ferrari’s stock dipped 1% pre-earnings but rebounded 1.8%, reflecting cautious optimism. If the elettrica and its peers match the success of the SF90, Ferrari could prove that even in turbulent markets, the prancing horse remains untamed.

Final Take: Buy with a long-term horizon. Near-term tariff pressures are offset by Ferrari’s premium pricing discipline, order-book strength, and the electrification tailwind. A target of €2.03 billion EBIT and €7.0 billion revenue remain achievable—if not conservative—given its cash flow and brand equity.