Ferrari's differentiation from other high-end automakers
High capital intensity, lack of pricing power, and cyclicality are a recipe for bad long-term returns，but Ferrari could be different.
What I can tell you is that for us, what is important is that we [stay] always unique and we keep always exclusivity for our cars. What our founder said - we want to sell always 1 car less than the market demands, was true, is true, and will be true. So concentration is happening. Yes, it's up to us what we are doing to manage properly the demand to keep it always exclusive
--- Benedetto Vigna - CEO & Executive Director, FY22 Earnings Call
优秀的抵御周期能力：Since Ferrari is selling only a very limited number of cars per year, I find it to be immune to cyclicality, as it only needs a very small number of customers every year
Average Selling Price： 1.No company comes even close to Ferrari's average selling price, as most of them offer lower-class vehicles；
2.The more important information we can learn is that Ferrari and Porsche are the only companies on the list that have raised prices sequentially and consecutively between 2019-2022. It's important in order to understand the companies' pricing power.
Recently, we see a lot of headlines regarding price cuts in the industry. Tesla plans to cut prices by up to 20%, Mercedes is cutting prices as it's seeing sales lag, and Stellantis forecasts prices will fall.In the car industry, however, dropping prices is a definite sign of a decrease in demand.
2.The more important information we can learn is that Ferrari and Porsche are the only companies on the list that have raised prices sequentially and consecutively between 2019-2022. It's important in order to understand the companies' pricing power.
Recently, we see a lot of headlines regarding price cuts in the industry. Tesla plans to cut prices by up to 20%, Mercedes is cutting prices as it's seeing sales lag, and Stellantis forecasts prices will fall.In the car industry, however, dropping prices is a definite sign of a decrease in demand.
Gross Margins：Porsche and Tesla, which also provide decent gross margins. As Ferrari and Porsche have shown their resilient pricing power, I believe their gross margins are safe. I do worry about Tesla's margin, as the drop in prices could send the company closer to the lower tier.
Return On Capital Employed：As Tesla and Ferrari have the highest ROCE, it should be noted that both companies are still growing their production capacity, as demonstrated by their delivery and revenue growth in 2022.
However, it remains to be seen if Tesla is able to sustain such elevated levels, as price cuts are already happening. On the contrary, it is reasonable to assume Ferrari's ROCE is on the way up, as it lowers its capex (see below) and brings new higher-priced models into the market.
However, it remains to be seen if Tesla is able to sustain such elevated levels, as price cuts are already happening. On the contrary, it is reasonable to assume Ferrari's ROCE is on the way up, as it lowers its capex (see below) and brings new higher-priced models into the market.
Capex as % of Sales：Tesla stands out as it spends the highest amount on capex as a percentage of sales. This supports the company's growth in production capacity, which translates to revenue and delivery growth.
the higher capex combined with the high ROCE explains Ferrari's results in recent years.
the higher capex combined with the high ROCE explains Ferrari's results in recent years.
I project EBITDA margins to increase incrementally to 40.3% due to higher prices, lower material costs, and a growing portion of high-margin revenues from sponsorships. This is at the high end of the EBITDA margin guidance management provided for 2026.
Overall, my assumptions result in EBITDA growth which is slightly faster than revenue growth, reflecting operating leverage and product & price mix.
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