Back in October 2020, I summarized the situation among supercar manufacturers Supercar Market Update Q3 2020 as:
So, how does this square with record levels of unemployment and economies that are officially in recession? When you stand back and look at both the actions governments have taken to date and the profile of the average supercar buyer, it actually makes some sense. Governments have pumped an enormous amount of cheap money into their economies while providing free cash directly to their citizens. All of this has served to postpone the pain of significant parts of economy shutting down for an extended period. Property prices haven’t crashed, and in some areas have actually increased as many of those that can afford to flee from cities to the countryside have. Global stock markets have recovered from an initial dramatic dip. The Dow Jones Industrial Average is up 12% from where it was at a year ago and the FTSE is down a similar level. The FTSE performance is probably more driven by Brexit uncertainty than Covid-19. All in, the net financial impact of all this on the average supercar buyer has been fairly neutral and many have not felt a significant decline in their overall net wealth. With sports, entertainment, dining out & travel basically shut down or significantly reduced and expensive vacations off the agenda for the foreseeable future, supercars have been one of the few available outlets and its driven sales. Most of these sales have happened in the $50k-$300k end of the supercar market, and it will be interesting to see how sustainable this is as the summer driving season turns towards winter in the northern hemisphere. Where in most recessions, the pain is spread across society, the economic impact of Covid-19 has really started at the bottom of the economic ladder and is now working its way up. With a second Covid-19 wave now hitting both Europe and the US, a quick recovery seems like wishful thinking.
In summary, right now we have a supercar market that has enjoyed summer. However, all bets are now off. The Covid driven factory shutdowns greatly helped a number of manufacturers clear excess inventory, but it also inflected severe financial pain on almost all. Not all manufacturers will survive, and those that have so far are already talking about much more modest ambitions. The Covid-19 pandemic is far from over, many of the changes it has caused are now permanent and the new normal, whenever it finally emerges, will certainly be different from the way the world looked in 2019.
Which brings us too today. We are still a long way from normal but there is a general feeling that the new normal now lurks somewhere over the horizon. There are three Covid-19 vaccines currently approved and being administered in multiple countries with the potential that a few more candidates will receive approval shortly. Supermarket shelves are well stocked in general these days and toilet paper is no longer the world’s most valuable commodity. That’s the good news and with it comes hope for a much brighter tomorrow. Today’s reality is a completely different story though. New daily cases of Covid-19 hit a new all-time high of over 800k worldwide in January now totaling over 100 million with over 2 million deaths. In the US more people have died of Covid-19 in less than a year than died in all of World War II. Multiple countries are in lockdowns and global travel bans are being reimposed where they had been lifted. Governments in the EU and North America are borrowing heavily to fund both Relief & Stimulus Packages with public debt levels now reaching new all-time highs. The early rollout of vaccinations has not gone smoothly in any country with the possible exception of Israel. Most countries are well behind their initial targets and it is expected that supply problems with both the Pfizer and Astra Zeneca vaccines will take at least another month or two to sort out. When looking at the projected vaccine production forecasts over the next couple of quarters, if all goes well, most of the developed world has a chance of achieving herd immunity late this year but it will then take another 12-18 months for the developing world to reach the same point.
In terms of the manufacturers, supply chains are still very much pressured and just because the production line is operating doesn’t mean all the parts to build a car are available. Multiple car factories have recently had to idle or cut production back due to a shortage of micro processers. I have also heard of multiple delays on supercar orders that extend for months. This speaks directly to the supply chain challenges, and with COVID cases at all-time highs in many countries, its unlikely to get better soon. On the bright side, with factories closed for several months last year, it did help both McLaren and Aston Martin work down their inventory gluts, with McLaren’s basically being depleted by the 2nd half of 2020.
In talking to a few supercar dealers, brokers, and friends they all indicated that sales the last few months have been good. Both new and used supercars have been moving well and inventory levels are on the low side. Great cars and those that currently fall into the “must have new new thing” are moving briskly if priced properly. Where I have gotten some interesting feedback is in the hypercar market where cars are continuing to change hands but the spread between the asking price and the selling price can be several hundred thousand dollars. There are a few sports cars and supercars that seem to have appreciated a bit in the last six months. I would put the McLaren 675LT, Ferrari F355, and the Porsche 911 (993) all in that group. I have also been following the Alfa Romeo 4C for a few months as its one I’ve always had a bit of a soft spot for going back to when I first saw the original concept at the 2011 Geneva Motor Show. I find it hard not to be intrigued by a carbon fiber tub sports car for $50k. 4Cs trade in a $45k-80k band depending on age and this band basically hasn’t moved in 3 years.
The challenge these days is that data is in very short supply. Where there has been some data, it has been generated by the big auction houses. However, the overall quality and number of lots and on offer at a few of the most recent auctions, has significantly declined. As an example, it’s now been over a year since a McLaren P1, Porsche 918, or Ferrari LaFerrari has been sold at an auction. In past years, you could expect at least one of these to find a new owner at any of the premier auctions. Clearly owners of these cars don’t want to take the risk right now that the exposure to the public market will have on values. The one car that has continued to regularly cross the auction block is the latest edition of the Ford GT. There have been nine that have gone under the hammer in the last 6 months. Of these nine, five found new owners but only one of the five was bid up to its low estimate. The other four that sold went for under the low estimate. Ironically the one that reached the low estimate was a very high mileage car (1,665 miles) by Ford GT standards. Most of the others had odometers that had yet to, or barely reached, triple digits including one GT that has traveled only 8.2 miles in its lifetime. The other supercar that has mostly disappeared from the public markets is the Porsche Carrera GT. The last one to show up at auction was a no sale last March at $570k. There is only one Carrera GT listed currently for sale on Autotrader in the US, 3 in the UK, and around a half dozen in the balance of Europe.
The January Arizona auctions normally kick off the collector’s car season. RM Sothebys, Bonhams, and Goodings all went ahead with rather thin catalogs while Barrett-Jackson delayed their sale until March. While it’s hard to draw any real conclusions from the Arizona auctions, what was surprising was to see 2 Koenigsegg Regera’s going across the block. Normally you might see 1 or 2 Koenigsegg’s in a full year and never more than one at any venue. What will be very concerning for Koenigsegg thought is that neither reached the low estimate. Both of the Regera’s have lived so far as garage art with 200 miles on one’s odometer and 369 on the others. Since neither is clearly an appreciating asset, it will be interesting to see if they now get driven. Koenigsegg’s have truly been the poster child for the low mileage crowd (The Tyranny of Low Mileage). Two other sales that caught my eye were a 2020 McLaren Speedtail at $2,975k, $500k under the low estimate and a very rare 1993 Cizeta V16T at $600k. While the Speedtail owner likely just got out whole after the auction house fees, the Cizeta went for $50k under its originally 1991 list price. The Cizeta was originally purchased on behalf of Prince Jefri of Brunei and therefore can be counted as yet another one of Prince Jefri’s poor investments.
If you look at the longer-term trends, it is generally consistent with where we were trending pre pandemic. Ferrari F355’s sits in the $50k-80k range depending on spec and Ferrari 365 GTB/4 Daytona’s seem to have stabilized in the $400k’s. Ferrari 430 Scuderia and Scuderia Spider 16Ms values have dropped back to where they were in 2014 and although Scuderia’s seem to be finding buyers, Scuderia Spider 16Ms seem to hang around on the market for months on end. The last Ferrari 275 GTB (Long Nose) sold went for $1.76 million, $240k under the low estimate. 275 GTB’s have been slowing sliding backwards for the last several years I would not be at all surprised to see a number of sales under $1.5 million in the near future. This is in line with demographic shifts as the older cars are less appealing to the younger generation of enthusiasts who did not grow up with them on their bedroom walls.
In summary, right now we have a supercar market that is remarkably stable. The bills from Covid-19 have yet to come due and where there has been severe financial pain, it hasn’t affected the supercar market, yet. Looking at both recent auctions and going back a couple of years now, the hypercar bubble is history. While new hypercars may still hold value, huge immediate gains on flipping them are a thing of the past. Where the pandemic has had a major negative impact so far is on a number of manufacturers. Aston Martin and McLaren both have raised enough funding to survive for the next year or two but not all of the others will make it. Those that do survive will all likely have much more modest ambitions going forward.
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