Ferrari's Profit Defies Tariffs! As European Car Makers are Wounded by Trump's Tariffs, Ferrari(RACE.US) Sees Profit Growth Despite Headwinds

According to our sources at Zhitong Finance APP, Ferrari (RACE.US), the global luxury car leader, has seen its profit rise in the second quarter despite extra tariffs. The company's total revenue increased by 4% year-over-year to €17.9 billion (approximately $20 billion), slightly lower than the market consensus of €18.3 billion. Net income rose by 6% to €7.09 billion.

Ferrari said that the recent EU-US trade agreement has reduced the threat of a 50% tariff, which had previously threatened its business performance. As such, the company is more confident in its full-year guidance and has deleted the "downside cushion" it had previously reserved, which represented a 50-point profit margin.

The company's stock price fell by 4.8% in Milan due to slightly weaker overall revenue. The stock has risen 1.5% this year so far.

Ferrari largely avoided the performance downturn experienced by competitors such as Porsche, which announced its earnings report last week and said it had lowered its guidance due to the US-China trade war.

Investors are betting that this Italian luxury car company will be able to pass on any additional tariff costs to its wealthy customers. Ferrari expects industrial costs to decrease in the second half of the year.

It is worth noting that the United States and the European Union agreed on Sunday to reduce the import tax rate for vehicles from EU member countries to 15%. This rate is lower than the previous rate of 27.5% and the 25% import tariff applicable to most global automakers, but still higher than Trump's new trade policy, which implemented a 2.5% tariff on European cars.

Notably, all Ferrari vehicles are manufactured in Italy, meaning that the company cannot offset higher costs by mass-producing them in the United States. The US is its largest market for luxury cars, accounting for about one-quarter of its deliveries. However, the company still has a large number of export orders and few cancellations, highlighting its pricing power and brand loyalty.

To maintain its long-term profitability of around 40%, Ferrari's CEO, Benedetto Vigna, must prove that he can pass on most costs to US customers. The company had previously announced plans to raise prices for some US models by up to 10% in March to offset Trump's tariff policy.

Lamborghini, Ferrari's long-standing rival, reported its earnings last week and said that it has seen a record-breaking delivery volume in the first half of the year, despite a 6% decline in profit due to tariffs. This shows that even if global luxury car demand declines sharply, wealthy customers will still have strong demand for the world's top luxury cars.

Ferrari is set to launch its first all-electric car in October. Its customers are predominantly high-net-worth individuals who buy for identity and collection rather than price. Research shows that Ferrari customers have a higher "price acceptance" rate compared to average luxury car levels, which is why the company is seen as a "price setter" rather than a "price taker," as evidenced by its March announcement of a 10% price increase without triggering order cancellations.

As a contrast, Volkswagen (VW), Renault and other European automakers have seen their profits decline due to Trump's tariffs. VW reported that its second-quarter revenue fell by 3% year-over-year to €808 billion, while net income declined by 29% to €38.3 billion. The company expects its operating profit margin for the full year to be between 4% and 5%, lower than its previous forecast of 5.5% to 6.5%.