Ferrari: pulling out of F1 could boost bottom line by £100 million
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Ferrari: pulling out of F1 could boost bottom line by £100 million

Will they, won’t they? That’s the question on investors’ lips when it comes to Ferrari, and its continued presence in the Formula 1 (F1). The luxury supercar maker has been a fixture on the racing track since the F1’s inception 67 years ago – but a change in the championship’s ownership threatens to see its oldest racing team pull out.

Ferrari’s share price has appreciated by 88% so far this year

ferrari

SOURCE: Yahoo Finance

In January, the F1 was sold to American investment group Liberty Media, which wants to even out the payment to various teams. This is great news for newer, smaller, teams, but a big problem for Ferrari: as the championship’s oldest (and one of, if not the) most iconic names, Ferrari currently gets more cash than anyone else on the track - £80 million just for turning up, and a bigger prize pot if it wins.

Beyond this, Ferrari runs the risk of rising costs, as it plans to introduce a new version of its 1.6 litre V6 engine in 2021. This is on top of the fact that Ferrari is already the biggest spender in the F1. Since the current contract expires in 2020, is renewal simply going to cost more than it’s worth?

Sergio Marchionne, Ferrari’s chairman, is beginning to think so. He said that the F1 “has been part of our DNA since the day we were born. So it’s not as if we can define ourselves differently. But if we change the sandbox to the point where it becomes an unrecognisable sandbox, I don’t want to play any more.” He added that leaving would be “totally beneficial” to Ferrari’s bottom line, but drew short of offering a final decision.

It seems unthinkable that Ferrari would leave the F1 after 67 years of competition. But then, until pretty recently, the idea of a Ferrari SUV seemed unthinkable too…

Disclosure

Dominion holds Ferrari in its Global Trends Luxury Fund.


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