Key Points

Tesla is rapidly evolving from a vehicle producer into a technology and artificial intelligence enterprise.
Ferrari has distinguished itself from standard car firms via strong pricing authority and elevated profit levels.
Many investors may not realize that about half of Ferrari's sales volume is already electrified through hybrids, and the firm is ready for what comes next.
10 stocks we like better than Ferrari

To say Tesla has delivered strong returns might understate its performance. A 10,000 dollar investment at the time of its initial public offering would now be worth around 2.57 million dollars.

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TSLA data by YCharts.

It is also fair to note that some investors might hesitate to accept the extra risk as Tesla advances toward a future involving humanoid robots, autonomous vehicles, and artificial intelligence. It is no longer the same electric vehicle company it started as, for better or worse.

If that shift prompts you to explore other options, there is another car maker, arguably the top auto stock available, called Ferrari that deserves consideration. Here are three reasons to evaluate it if Tesla no longer fits your comfort level.

1. Strong profits all around!

Ferrari has long set itself apart from the usual auto industry approach. The sector is typically capital heavy, prone to cycles, and marked by slim profits. As shown in the graphic below, Ferrari's earnings before interest, taxes, depreciation, and amortization margins far exceed those of mainstream car companies.

RACE EBITDA Margin (TTM) data by YCharts; TTM equals trailing 12 months.

Ferrari's gross profit margins often exceed 50 percent, and Wall Street frequently treats and values the company like a luxury goods firm. That view holds merit given how its pricing strength and brand prestige allow it to intentionally cap output to build rarity and exclusivity. The outcome is that Ferrari rarely requires discounts or promotions to move vehicles, which boosts bottom-line results.

This matters for Tesla investors because the company remains active in the standard auto market, where price reductions, competitive battles, and similar issues can quickly pressure margins. Ferrari not only achieves higher profits across every measure but also maintains more consistent and steadily improving margins than Tesla.

This leads naturally into what supports those margins.

2. One fewer car...

Another area where Tesla falls short compared to Ferrari is in brand strength and pricing authority, which underpin the high margins noted earlier. Enzo Ferrari's well-known approach was to produce one fewer car than the market requested.

It is a straightforward idea that few achieve, yet Ferrari executes it with great success. While Tesla aims for millions of vehicles aimed at broad buyers, the Italian firm makes fewer than 15,000 units annually, fostering exclusivity and strong emotional appeal. This is why Ferrari functions as a lifestyle luxury name rather than a typical car maker.

Here is an example of the brand's existing strength: The company invests almost nothing in advertising. Instead, the Scuderia Ferrari Formula 1 team drives its marketing and visibility. It delivers substance too, since racing advances flow into its premium models and help justify their high prices.

Ferrari's F80 carried a near 4 million dollar price tag. Image source: Ferrari.

Another distinction between Tesla and Ferrari is that the former sometimes relies on price reductions or financing deals to sustain interest. Ferrari, by contrast, will not even allow purchases of its limited top-tier supercars unless buyers have already acquired other models previously.

Owning a Ferrari requires substantial funds, but it goes beyond money alone. The company must extend an invitation to join. These elements, along with others, make its brand and pricing power nearly unrivaled.

3. A distinct buyer group

Many investors describe Ferrari as recession-proof, but it is more accurate to call it recession-resilient. Its customers possess ultra-high net worth and remain largely shielded from standard economic swings, inflation, or interest rate changes. They can handle multimillion-dollar hypercars even during a worldwide downturn, giving the company a steadier operation that sidesteps the auto sector's usual volatility.

The loyalty the brand inspires is as notable as its other traits. It even ranks buyers according to how many cars they own, how long they have held them, and their involvement in official Ferrari events. In exchange, only the most devoted multicar owners receive invitations to acquire highly exclusive models that command premium prices and sell out before any public announcement.

What it all means

Ferrari operates in a separate realm, and although it shares the industry with ordinary car makers, the two function in distinct spaces. This shows in its strong and growing margins, its influential worldwide brand and status that enable extreme pricing without discounts or incentives, and its highly devoted customer group.

These are all qualities Tesla hopes to develop eventually, but at present, Ferrari stands out as a strong choice if you want exposure to Tesla yet feel uncertain about its path forward.

Should you buy stock in Ferrari right now?

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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ferrari and Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.