Supercar Market Insights & Analysis – July 2022

I’ve refrained from doing a market update for the past couple of quarters as a lot of what was happening in the supercar market overall just didn’t make a lot of sense. Back in September 2021, I summarized the situation in the market (Supercar Market Update Sept 2021) as follows:

In summary, right now we have a sport & supercar market that has been on the rise this year. 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. While money remains plentiful and cheap, the day of reckoning will continue to get punted into the future. Looking at both recent auctions and going back a couple of years now, the hypercar bubble is history despite recent gains for both the McLaren P1 and Porsche 918. These rises in P1 & 918 values are only taking them back to where they were when new. While new hypercars still hold value, huge immediate gains on flipping them are a thing of the past. Younger sports and supercars from the 90s & 00’s are where the majority of the gains in the market have been made in 2021 with the older vintage cars either holding are slowly declining. Demographic shifts will likely accelerate this trend over the coming years.

How things have changed.

The Macro Situation

Which brings us to today. We are still a long way from the old normal and I doubt we will be getting back there anytime soon. Today’s reality feels like it’s the new normal whether we like it or not. Covid is here to stay, and we are going to be living with waves of outbreaks for the foreseeable future. With a large percentage of the population bad at math, the window for creating herd immunity via near universal vaccination closed as soon as the highly contagious Omnicrom variants emerged. While the Covid vaccines still seem to provide substantial protection against severe illness, they are much less effective at providing protection against moderate infection. Hence Covid is still circulating widely globally which is providing fertile ground for continued mutation into increasingly virulent forms.

On the economic front, the decade of cheap money is over. Joe Biden’s US economy looks a lot like Jimmy Carter’s circa 1979. Inflation is at a 40 year high, the stock market has tanked, and the Fed has raised interest rates 3 times already this year with a fourth coming in a few weeks. The US $ is parity to the € for the first time in 20 years and is near an all time high vs. the British £. The Iranians are busy stirring the pot and the Russian’s have invaded a neighbor again. Just like the last time, it’s likely not going to end well for them. Turns out that Russian tanks are just as vulnerable to US made hand held missiles as they were 40 plus years ago.

The final warning sign that markets were about to implode was seeing Michael Saylor back in the national news. Saylor is the majority shareholder and CEO of MicroStrategy, a mid-size software company based in Virginia. Back in March 2000, the U.S. Securities and Exchange Commission (SEC) brought charges against Saylor for cooking MicroStrategy’s books for the preceding two years. This event helped kick off the bursting of Dot Com bubble in 2000 and within a month, MicroStrategy’s share price had tanked by 90%. Roll forward to 2021 and like a human Cicada, Saylor has reemerged in the national news as one of Bitcoins more vocal public cheerleaders. MicroStrategy, with Saylor still at the helm, has bet heavily on Bitcoin. As of June 2022, that bet is $1.1 bil. in the red and in a bit of deja vu MicroStrategy’s share price is down 75% from its 52 week high. Call it the “Saylor Sign” and when it appears, bad things are about to happen in the markets.

Instead of going through a methodical analysis of different parts of the Supercar market, as there are plenty of better informed people who already do that, I thought it might be more interesting to layout a few things that have caught my attention.

Bring A Trailer (BAT) & the BMW Z8 Craze

BMW Z8s have been a very hot BAT car for a while now and it looks like just about every Z8 in the US has changed hands in the last 2 years. In the BAT driven frenzy, average values have steadily risen by $50k to peaking at over $200k for a well-maintained low mileage Z8. The rarer automatic Alpina V8 versions have been going for a 50% premium over the base manual Z8s with four Alpina’s toping $350k in April and May of this year. As a benchmark from the same 1999-2004 time frame, a Ferrari 360 F1 Spider is a $70-90k car these days. The 6 speed manual 360 Spiders do command a premium despite being the “base” model when new. (the “manual” premium on 360’s is just a bit insane, every mid engine Ferrari built before 1997 was a manual). Net net, you pay a premium to not have to shift a Z8 and you do the same to have to shift a 360. In total 2,543 Z8s were sold in North America which is roughly on par with the 2,389 360 Spiders Ferrari sold. Prices ($128k) and performance stats on both the Z8 & 360 were nearly identical when new. This begs the question on why a BMW Z8 is worth 3x what a Ferrari 360 F1 Spider is today. I suspect the rapidly changing market we are now in will have an answer for us on that shortly.

The Ferrari F12 & 812

I have been following the Ferrari F12 and 812 market fairly closely for about a year now. Adding a Prancing Horse badged V12 GT to the garage has been high on my list for quite some time but I am not in a rush and refuse to pay a premium for a car that has traditionally been the depreciation hog of the Ferrari line up. Just 6 months ago, if you did a search for F12s across Ferrari US dealerships, you would be lucky to find 6 cars for sale. Autotrader normally had 15-20 F12s but that was it. Today there are 16 F12s on the US Ferrari preowned website and 48 on Autotrader. While prices on F12s haven’t moved south that much yet, a glut of cars on the market that aren’t moving is a pretty good indicator of where things are headed.

In the 812 arena, it’s clearly about to become a buyer’s market. Ferrari US has an impressive 49 listed today with 80 now showing up on Autotrader. Six months ago, there might have been 10 on the Ferrari site. Many of the 1-2 year old 812s are still listed at or above sticker price. This is something that I have never seen before on a V12 Ferrari in my more than 20 years of Ferrari buying experience and just reflects the market madness of the last several years.

I would not be surprised to see an average of a $50k drop in F12 prices in the next 12 months with 812s taking an even bigger hit.

The Hypercar Trinity

Prices on the 2013/2014 Hypercar Trinity, which include the oddly named Ferrari LaFerrari, the McLaren P1, and the Porsche 918 have been fairly stable recently. LaFerraris now sit squarely in the $2.5-$3 mil. range depending on spec and mileage. Both P1s and 918s are up from an early Covid lows of $900k to $1.5-1.7 mil. now. Where prices go from here will be very interesting to watch. I expect Ferrari, McLaren and Porsche will be announcing their next generation of Hypercars either late this year or in early 2023. In both Ferrari and Porsche’s case, they are likely to be loosely based on their LeMans 2023 Hypercar entries. What this does to values on the last generation will be interesting to see. The other factor that is coming more into play is the ever rising maintenance costs on these technology showcases. When I hear owners with net wealth well into the 9 figure range being shocked by the service bills, it’s definitely eye watering.

The Koenigsegg Command Economy

Koenigsegg has operated in a very different value universe for multiple years now. Prices on their new cars have risen astronomically in the last decade. During this period, Koenigesgg, in a very command economy type approach, went to considerable lengths to make sure it’s cars sold at or above estimates (Car Market Q3 2019) in the rare instance when one has shown up at auction. That all changed in 2021 and for a brief 8 month period, Koenigseggs seem to have joined the free market. A record 4 Koenigseggs sold at auction in 2021 (vs.6 in total from 2015-2020) and not a single one hit its low estimate. Since then Koenigseggs have disappeared from the auction circuit and only a small handful are even listed for sale globally, most with “Price on Application”. With Koenigseggs clearly now labeled as non-appreciating assets by the open market, in today’s new economic reality it will be interesting to see if a number of owners decide to get out soon.

Vintage Ferraris

If you look at the longer-term trends on a few other models, it is generally consistent with where we were trending pre pandemic. Ferrari 365 GTB/4 Daytona’s seem to have stabilized back in the $400-$500k range. The last Ferrari 275 GTB (Short Nose) sold went for $1.9 million with another 275 GTB (Long Nose) as a no sale at the same price. 275 GTB’s have been on a very gradual slide backwards for the last several years and those sold at auction have either sold just over the low estimate or come up a bit short. The Ferrari 250 Lusso is on a similar path. Back in 2015 they were $2 mil. cars and now $1.2-$1.4 mil. is where the market sits. 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. These are also all cars that take real skill to drive and punish mistakes with massive repair bills. In addition, with each passing year, finding both parts and a skilled mechanic who can care for the car are becoming increasing difficult.

70’s Ferrari Fiberglass

Ever since I owned one well over a decade and a half ago, I have always been intrigued by the Ferrari 308 GTB “Vetroresina”. These are the 1^st generation Ferrari 308 GTBs produced in 1975-77 with fiberglass bodies. Just over 800 were produced, making them fairly rare. For the better part of the last decade these “glass” 308s have commanded over a 100% premium vs. steel bodied 308s. In the Covid era, they have traded hands remarkably consistently in the $150k range up until the last 3 months. After sales at $155k in both Feb and March, the next sale was at $135k in May, and the last to appear in July was a no sale at a high bid of $115k against a low estimate of $125k. Whether $115-125k is the new market price, or if the slide continues should be clear in a few more months.

Summary

Right now, we have a sport & supercar market that is beginning to deflate. Inventories are way up, even if prices haven’t moved much, yet. The bill from Covid-19 and many of the excess of the last decade has come due. Money, while still fairly plentiful, is no longer cheap. Those models that have exploded in value during the Covid era are the ones most likely at risk of a rapid decent. The Hypercar bubble is history and values on the LaFerrari, P1 & 918 have been stable for quite a while now. The older vintage cars are either holding or in gradual decline. Demographic shifts, as the percentage of the population that knows how to drive a manual car continues to decline, will likely accelerate this trend over the coming years. To end on a positive note though, if you have the cash, the next 6-18 months could be a great time to buy.