Ferrari’s recent unveiling of its first EV, the Luce, has been very controversial. Many, myself included, have been critical of its styling, thinking it looks nothing like a Ferrari. Some have even criticized Ferrari’s decision to make an EV at all.

Ferrari faced criticism when it introduced the Purosangue in 2022. The Purosangue is essentially an SUV, although Ferrari doesn’t classify it as one. This, too, faced criticism from those that thought an SUV goes against Ferrari’s DNA.

Ferrari’s brand is its greatest asset, enabling immense pricing power, industry-leading margins, and an order book that stretches into next year for some models. People pay a hefty premium for a Ferrari, and Ferrari sits on the very top of the automotive prestige hierarchy. It has more in common with luxury-goods brands than with traditional automotive manufacturers. It’s closer to Rolex than Ford.

With the brand being Ferrari’s greatest asset, it is critical that Ferrari preserve it. Anything that damages the brand hurts the company and should be avoided. 

At the same time, Ferrari wants to grow its sales. One way of doing this is by expanding into new classes of vehicles, such as SUVs and EVs.

Here lies the conflict. Can Ferrari expand its reach without deteriorating the brand? Or must it remain a two-seater sports-car brand centered on combustion engines and hybrids? Is there a middle ground?

The answer is yes, it can expand its reach without deteriorating the brand, and the key to this is brand evolution. Brand evolution allows a brand to expand but remain true to the brand’s DNA. It requires a company to fully understand what the core values and traits of the brand are, and only then can it find ways to incorporate those traits into new opportunities.

How does this apply to Ferrari? The first step is to define the brand. Ferrari’s core traits, in my opinion, are prestige, exclusivity, elegance, luxury, driver engagement, and motorsport-pedigree performance.

Ferrari is a highly prestigious brand. It is known worldwide and carries a special aura about it. It needs to maintain that by keeping its standards extremely high. The company can do that by protecting the other traits of the brand.

Exclusivity ensures that Ferrari never becomes a mass market, readily available brand. Ferrari needs to limit production sufficiently to ensure that demand grows faster than supply. This doesn’t mean that it can’t increase production. In fact, by expanding into new categories such as SUVs and EVs, it can boost demand enough to allow for an increase in production while still maintaining its exclusivity. However, the company needs to monitor demand closely to ensure that supply doesn’t outstrip demand.

Elegance defines the styling of Ferrari. Ferrari isn’t trying to be the boldest brand. There are other high-end automakers that make supercars that are more expressive than Ferrari. Rather, Ferrari stands for a refined elegance. This is one good reason for Ferrari strongly discouraging unauthorized modifications of its cars, in part to preserve the refined character of its vehicles.

Ferrari is a luxury brand. The interiors of Ferraris are crafted with attention to detail and high-quality materials. Ferrari must not cut corners in production; its vehicles need to be built to the highest possible standards.

Ferraris are drivers’ cars first and foremost. While few passenger seats rival those of a Ferrari, Ferraris are centered on the driver. They are meant to connect drivers with their cars and the road and to elicit an emotional response to driving.

Finally, Ferrari is a performance brand. Ferrari’s origins lie in motorsport, and it has the world’s most impressive list of motorsport accomplishments. All Ferraris must embody the brand’s motorsport pedigree through exceptional performance.

Can an SUV like the Purosangue meet these criteria? Yes, absolutely. It is prestigious, exclusive, elegant, luxurious, high-performing, and prioritizes driver engagement. Of course, its dimensions do limit its performance capabilities compared to a dedicated two-seater sports car. However, its performance remains exceptional, fast, agile, and superior to almost everything on the road. From the reviews I’ve read and seen, it seems to drive with sports-car-like dynamics. In the Purosangue, with its aerodynamic body, four seats, V12 engine, and 7.2 inches of maximum ground clearance, Ferrari essentially built a sports car with added ground clearance and practicality rather than a traditional SUV. By doing so, Ferrari was able to expand into a new vehicle category while preserving the brand’s DNA.

The Purosangue is an example of an evolution of the brand. The Purosangue maintains the key traits of a Ferrari, but expands it to an SUV. If Ferrari were to build a big, bulky eight-seater SUV that doesn’t have the handling characteristics of a sports car, then that would be something I would view as a dilution of the brand rather than an evolution.

What about EVs? In principle, an EV is perfectly compatible with Ferrari’s DNA. EVs can be very prestigious, exclusive, elegant, and luxurious. Although different from combustion engine vehicles, there is nothing inherent in EVs that, when designed properly, prevent them from having performance characteristics that honor Ferrari’s motorsport legacy or that stop them from emphasizing driver engagement.

However, the Luce itself falls short. The Luce doesn’t have the elegant styling of a Ferrari. It looks modern and futuristic rather than elegant and sporty. Designed in collaboration with LoveFrom, a design firm founded by former Apple chief design officer Jony Ive, the Luce looks more like a Silicon Valley car than a Ferrari. The problem for Ferrari is that a Silicon Valley car is not what Ferrari is supposed to embody. Design is not merely cosmetic for Ferrari. Rather, design helps carry Ferrari’s identity, and a drastic design change conveys a drastic change in the brand itself. If Ferrari decides to continue to pursue these types of design decisions, the brand’s reputation and identity are at risk. The Luce isn’t a design evolution; it is a fundamental departure from the brand’s DNA. If Ferrari loses its DNA, it puts its brand at risk. In the long term, that could endanger its greatest asset—Ferrari’s brand, the foundation of its moat and pricing power.

Disclaimer

This publication is for informational and educational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any securities. The views expressed are the author’s personal opinions and are subject to change without notice.

The author holds a long position in Ferrari (RACE) at the time of publication. More broadly, the author may hold positions in any securities discussed in this publication and may buy or sell such positions at any time without notice. This creates a potential conflict of interest.

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