Ferrari Formula 1 driver Charles Leclerc recently took delivery of a new car. Custom ordered from the Ferrari factory in Maranello, Italy, Leclerc’s new Ferrari SF90 XX Stradale looks like one of those concept cars that will never actually come to market.

Painted in matte black with Leclerc’s racing number in red trim, Ferrari hand-delivered the first road car from its new racing division directly to Leclerc in Monaco.

The car itself is a masterpiece, packing over 1,000 horsepower and a 0-60 time of two seconds. It’s also pricey, of course, with Ferrari selling out of all 799 units at a retail price of nearly $900,000, resulting in over 700 million in revenue from just one product.

But while you or I may get excited about additional PTO or 401k matching, million-dollar supercars are just another benefit of being Ferrari’s top F1 driver. And, more importantly, it’s the perfect example of how Ferrari uses its status in Formula 1 as a (profitable) marketing channel to engineer fandom and continuously set sales records.

The truth is that Ferrari was never meant to be a car company. In fact, Enzo Ferrari was a racing driver at heart who only started selling cars in the late 1940s so that he could fund his racing team, Scuderia Ferrari. Enzo started producing cars that were unlike anything else on the market, primarily because of the small, open-top Barchetta car.

Enzo then pumped all of the money from Ferrari’s first year of sales back into the racing team — and the investment paid off. Ferrari’s racing team won the 24 Hours of Le Mans in 1949. They grabbed everyone’s attention when they showed up to the Monaco Grand Prix in 1950, and Ferrari took home its first-ever Formula 1 win less than a year later, winning the British Grand Prix at Silverstone in front of 50,000 fans.

This would have been considered a massive success by most. Car racing is an expensive sport, and the fact that Enzo Ferrari could design — and pay for — race-winning cars within just a few years was almost unthinkable. But while everyone was impressed with Enzo’s ability to build a competitive racing team, Enzo quickly realized that he was actually creating an entirely new business model.

Think about it this way: What are the world’s most iconic brands today? Rolex? Nike? Amazon? Netflix? Google? Disney? Facebook? Coca-Cola? Gucci? Louis Vuitton?

I wouldn’t argue against any of those, and no one would blink if we put Ferrari in the same category. However, the main difference between those companies and Ferrari is that the former spends hundreds of millions of dollars annually on complex marketing campaigns while the latter doesn’t spend a dime on ads, commercials, or sponsorships.

Instead, Ferrari built its brand through emotion. Enzo Ferrari spent decades almost exclusively obsessing over the performance of his Scuderia Ferrari racing team because he knew that if they built fast cars and won races, Formula 1 would provide him with a big enough platform to organically build fandom and eventually sell cars.

It wasn’t just a good bet by Enzo; it quite literally changed how brands think about marketing today. Maybe Red Bull comes to mind? They stole the idea from Ferrari.

Ferrari is the most successful team in Formula 1 history. That resume includes more race wins (248), driver championships (15), and constructor championships (16) than any other team. And these results, combined with Ferrari being F1’s longest-standing team, have turned a car company into a cultural movement that’s difficult to explain.

Ferrari essentially owns the entire country of Italy. If you don’t believe me, go to the Italian Grand Prix at Monza. All shops are closed on race day, and tens of thousands of fans flood the track with enormously large Ferrari flags during podium celebrations.

Ferrari’s fandom doesn’t just live and die in Italy, though. Ferrari is consistently ranked as the most popular team in Formula 1, with millions of fans in countries all around the world, from the U.S. and China to Germany, Japan, Mexico, and Brazil.

Most of these fans will never be able to afford a Ferrari. I mean, can you blame them? An entry-level Ferrari costs $250,000, and that’s if you can even get an allocation.

However, this equity imbalance is perfectly fine with Ferrari because their road car business creates demand by limiting supply. Ferrari only sells about 13,000 cars each year. This is the sweet spot — 2x more inventory than Aston Martin sells (6,620) but a fraction of what Mercedes (2 million) and Alpine (2.2 million) sell each calendar year.

2023 Cars Sold By Publicly Traded Automakers In F1

• Ferrari: 13,663

• Mercedes: 2,044,100

• Alpine Renault: 2,235,345

• Aston Martin: 6,620

This model works so well because Ferrari knows that if they build fast cars and win races, the demand for their product will always exist. For example, Mercedes used to brag in its annual reports that the German car company received 25% of all television time during their championship-winning seasons in Formula 1. Some will say that’s a throwaway line to impress shareholders, but that TV time is worth more than $5 billion in advertising value because F1 averages 90 million viewers each race weekend.

This is precisely why Ferrari was comfortable spending half a billion dollars annually on their Formula 1 team (and losing tens of millions each year as a result).

However, that dilemma has recently changed for the better. Formula 1 introduced a cost cap in 2021 in an attempt to promote parity by limiting how much teams could spend annually. This has tightened the field, to a degree. But more importantly, the cost cap allowed high-spending teams like Ferrari to cut expenses in half. The Ferrari F1 team now generates a $50 million annual profit and is worth more than $3 billion, effectively turning a once costly marketing channel into a profit center for the brand.

Ferrari F1 Revenue & Valuation

• 2023 valuation: $3.13 billion

• 2022 revenue: $504 million

• 2022 profit: $50 million

The setup between Ferrari’s Formula 1 team and its road car company is something that many teams have tried to copy. Mercedes, Alpine, McLaren, and Aston Martin all come to mind, and you could argue Red Bull Racing is deploying a similar playbook.

Ferrari’s on-track performance drives everything for the brand. The Ferrari F1 team has already won five races this season and currently sits second in the team standings, leading to a 9-month net profit this year of $1.24 billion — an 18% increase from 2023.

Ferrari’s shipments were down 2% last quarter to 3,383 cars, but the luxury brand still makes more than $100,000 in *profit* per car sold annually. Ferrari’s business model also assures they will always have demand for new products, as the brand only allocates premium models to customers that have a long track record of purchases.

“We always said we give priority to the quality of revenues, not to the quantity,” says Ferrari CEO Benedetto Vigna. “This is also the way you have to read the evolution of our business plan.”

This isn’t just marketing jargon, either. Ferrari’s stock price is up more than 150% over the last five years, whereas other F1 brands like Mercedes (-0.6%), Alpine Renault (-12%), and Aston Martin (-91%) have all seen their stock decline during that period.

And things may get even better for Ferrari. Seven-time Formula 1 World Champion Lewis Hamilton will join the Ferrari F1 team next year. He is easily one of the world’s most famous athletes, with 38 million followers on Instagram alone, and his presence should help them sell more sponsorships, merchandise, and, yes, even more cars too.

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