Supercar Market Insights & Analysis – Sept 2021

I’ve refrained from doing a market update for the past several months as a lot of what was happening in the car market overall just didn’t make a lot of sense.  I’m not sure it still does but post the Monterey Auctions, there is a bit more data to at least wade through.  Back in January 2021, I summarized the situation in the market (Supercar Market Update Jan 2021) as:

 

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 several years but not all of the others will make it. Those that do survive will all likely have much more modest ambitions going forward.

The Macro Situation

Which brings us too 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 here to stay for quite a while.  I suspect that while the overall situation with Covid will continue to improve slowly, we are going to be living with waves of outbreaks.  As new variants emerge and spread globally, outbreaks will continue to wash across areas with low vaccination numbers.   The hope in many developed markets of achieving herd immunity by the end of 2021 is now a pipe dream as it turns out a not insignificant percentage of the population is bad at math.  Multiple countries are in still instituting regional lockdowns and global travel remains a major challenge with each country having its own rules which are all subject to change at a moment’s notice.  Perhaps the best current example of the chaotic situation is the fact that vaccinated US tourists can drive across the border into Canada but vaccinated Canadian tourists cannot drive into the US despite the fact that Canada has a higher vaccination rate than the US.  Supermarket shelves are better stocked in general these days, but all supply chains remain under pressure.  There is still the occasional runon toilet paper, but it is no longer the world’s most valuable commodity.  Supply chain challenges have driven inflation, and prices are up across the board.  The labor market remains very unsettled with a unique combination of still high unemployment, a record number of job openings, rising wages, and a record number of resignations. 

Car Manufacturers

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.  Most recently General Motors has announced they will be stopping production for several days at a number of factories due to a shortage of micro processers.  This combined with the Covid driven factory closures back in 2020 has resulted in a large shortage of new cars in all segments at a time of rising demand.  Whatever excess inventory that was sitting on dealer or manufacturer back lots is now all long gone.  The net result has been an increase of prices across the board for both mainstream new and used cars.

The Bring A Trailer Impact

The jumps in prices and a recent frenzy to “buy now” seem to vary greatly by buying venue.  Ferrari F355s are the poster child for this phenomenon.  Looking at the on-line auctions at Bring-A-Trailer, it would seem as if half the Ferrari F355s in the US have changed hands in the last year at ever increasing prices with a few now crossing the $150k line.  However, when you look at F355s that have gone under the hammer at more traditional auctions (examples: Bonhams, Goodings, RM Sotheby’s, etc) prices really haven’t moved much in the last couple of years and still sit mostly in the $50k-$80k range. The only explanation I can think of for the difference is one group of buyers understands the F355s rather substantial maintenance costs and the other group just doesn’t want to miss out, has wanted to own a F355 for a long time, and views the maintenance costs as background noise. How many of the buyers in the 2nd “heart over head” group who will then dump their cars back onto the market after the first $10k cambelt change bill will be interesting to see.  The BMW Z8s are another very hot BAT car right now and it looks like just about every Z8 in the US has changed hands in the last 2 years. Average values have steadily risen by $50k to over $200k now for a well maintained lower mileage Z8.  On the flip side, there are still some bargains to be found if you look hard, Aston Martin DB9s are changing hands in the $40k-$60k range which is quite a bargain for a still fairly bespoke built V12.  A similar era Ferrari 599 GTB will set you back almost twice as much despite similar list prices when new. The Porsche 911 (993) series haven’t hit a ceiling yet which I find hard to comprehend as they aren’t exactly rare and there are always plenty of them about for sale. Porsche 993 values seem to rise by $10k every year.

Super & Hypercar

Moving on to Super & Hypercars, in talking to a dealers, brokers, and friends they all indicated that sales continue to be great.  Both new and used supercars have been moving well and inventory levels are very low.  Used prices on almost all models have risen in the past year and getting inventory to sell has been a challenge.  In demand recent models are going for at or above list in some cases. The hypercar market is where things get a bit more interesting.  Cars continue to change hands and some models have recently appreciated, including stunning jumps north for both the Ferrari F40 and Porsche Carrera GT.  However, the spread between asking price and selling price can still be well into six figures. 

There are a few cars that have held fairly steady.  The most recent iteration of the Ford GTs continue to show up regularly at auction.  Selling prices have remained in the $700k to $1 mil. range.  The other consist Ford GT element is odometers indicating that new tires will not be needed any time in the near future. 7 of the 14 GTs that have come up for auction this year had less than 100 miles on the odometers and only one GT had traveled over 1,000 miles (see: The Tyranny of Low Mileage).  The GT is an interesting case study, it’s a car that still being produced, well over a thousand are likely to have been delivered to date, used prices are still higher than new, most owner’s use them as paper weights during the two years of ownership that Ford mandates, and a rarer five year old McLaren 675LT still beats it on just about every performance metric for less than half the price.  On top of it, just about everyone who has driven both will tell you the McLaren is the much more pleasant car to spend time in.  I must admit, the garage queen appeal is not something I really understand.

Going back to the Monterey Auctions in August, there were a few things that really stood out.  Ferrari F40s took a major leap up in value with 2 F40s going for more than $2 mil. for the first time with a third F40 finding a new home for $1.6 mil. The immediate question is does this represent a new threshold for F40 values.  The answer is yes and no.  Looking at the details on each of the F40s sold, the two cars that broke through the $2 mil. mark were very low mileage rarer US spec F40 that had likely only been removed from their cryovac pouches for the auctions and are most likely to be headed right back into a hermetically sealed environment to live out the rest of their un sat in days.  The F40 that was hammered down for $1.6 mil. had 16k miles on the odometer.  Net net, very low mileage garage art F40s are likely now $2 million plus cars but ones that have been driven, cherished, and enjoyed still sit in the $1.3-$1.6 million range with the heavier ugly bumper US spec F40s commanding a slight premium over the Euro spec cars. 

Perhaps my favorite result in Monterey was the McLaren F1 which was hammered down for $18.6 million.  This car was perhaps the lowest mileage McLaren F1 still in existence (outside of the several that are still being held captive in Brunei).  Initial speculation was it would go for well over $20 million given the miniscule 390 km on the odometer.  In this case there didn’t seem to be any garage queen premium and I have heard that the new owner intends to drive the car.  Perhaps McLaren F1 values have mileage immunity.

The final eye-opening result in Monterey was a run of the mill spec (silver/black) low mileage Porsche Carrera GT breaking the $1 mil. mark for the first time with a sell price of $1.1 mil.  Three years ago, this would have been a $650k car.  Again, the question is are Carrera GTs now $1 million cars?  While one sale doesn’t make a market, given the shortage of Carrera GTs for sale in the US these days, it does appear that values have increased another $150k in the last year and a half and now sit at $850K and above depending on mileage and condition.  The rise in Carrera GT values also seems to have had a positive effect on Porsche 918s. Three 918s went under the hammer in Monterey and all three sold beat their estimates.  It’s the first time that two 918s have been auctioned for more than $1.5 million since 2018. 

The other two members of the 2013/2014 Hypercar Trinity, the oddly named Ferrari LaFerrari & the McLaren P1 have also bounced back up a bit from lows in 2019.  LaFerraris have bounched up $500k and now sit squarely on the $3 mil. mark. P1s are up from a low around $900k and have risen to $1.2-1.3 mil. now.  Both the P1 & LaFerrari are coming up on major maintenance bills for lithium battery replacement sin the coming years.  It will be interesting to see how this impacts values over the coming couple of years. 

The old saying that a rising tide lifts all boats apparently doesn’t apply to Koenigseggs.  Koenigsegg has operated in a very different value universe for multiple years now.    Prices on their new cars have risen astronomically and in the recent past, Koenigesgg has gone 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.  This all seems to have changed in 2021.  A record 4 Koenigseggs have been sold at auction this year (vs.6 in total from 2015-2020) and not a single one has hit its low estimate.  Koenigseggs tend to be the poster child for the low mileage crowd.  Now since they are clearly not appreciating assets, it will be interesting to see if their current owners are brave enough to drive them. 

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 $500k’s.  Ferrari 430 Scuderia and Scuderia Spider 16Ms values have risen 10-20% off of 2019 lows 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 (Short Nose) sold went for $1.6 million, $175k under the low estimate.  275 GTB’s have been slowing sliding backwards for the last several years and those sold at auction have either just hit the low estimate or come up short.  I would not be at all surprised to see a number of sales under $1.5 million in the future.  The Ferrari 250 Lusso is on a similar path.  Back in 2015 they were $2 mil. cars and now $1.5 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 well and reward mistakes with massive repair bills.

Summary

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.

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September 2021

 

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