Supercar Market Update – Q1 2020

As a follow up to the Q4 2019 car market article (Market Update Q4 2019) I’ve continued to track the Ferrari F355, Porsche Carrera GT, and the Ferrari 365 GTB/4 Daytona, as I believe these are good bellwethers for the market in general.  On occasion, I also take a glance at Koenigseggs, the McLaren P1, Porsche 918, and the Special Series Ferraris out of personal interest.  It’s wasn’t too long ago the F355 Spiders were regularly selling in the $90-100k range and market experts were predicting Daytona would be $1 mil cars, which is certainly not the case today.  On a more positive note, the one car that has held steady in value is the Carrera GT.  CGTs have been rock solid in the $700k range for the past year.  

A few Q1 2020 results of interest are:

49k Mile 1973 Ferrari 365 GTB/4 Daytona, Sold $500k

53k Mile 1971 Ferrari 365 GTB/4 Daytona, Sold $420k

62k Mile 1970 Ferrari 365 GTB/4 Daytona, Sold $506k

NA Mile 1972 Ferrari 365 GTB/4 Daytona, Sold $495k

5k Mile 1995 Ferrari F355 Spider 6-Speed, Sold $69k 

14k Mile 1996 Ferrari F355 Spider 6-Speed, Sold $49k

28k Mile 1997 Ferrari F355 Spider 6-Speed, Sold $48k

2k Mile 2014 McLaren P1, Sold $1.05 mil

1k Mile 2015 McLaren P1, Sold $990k 

2k  Mile  2005 Porsche Carrera GT, Sold $710k

5k  Mile  2005 Porsche Carrera GT, Not Sold at High Bid of $570k

1,600 Mile 2015 Porsche 918, Not Sold at a High Bid $1.2 mil

3,800 Mile 2015 Porsche 918, Not Sold at a High Bid $900k 

12k Mile 2008 Koenigsegg CCX, Not Sold at a High Bid of $850k

These are very consistent with the trajectories seen in Q4.  This may be all quite interesting but since someone in Wuhan ate an undercooked bat, it’s all become completely irrelevant. 

So, where does this leave us?  Right now we have a market that is basically frozen.  Asking prices haven’t changed but no one is buying.  In most places around the world, even if you wanted to buy or sell a car, it just not practical or feasible.  This situation isn’t likely to change for at least another month or two, and perhaps much longer.  During this deep freeze, economies are tanking, unemployment is skyrocketing, and the world is awash in a pandemic driven tragedy unlike any we have experience in our lifetimes. 

Once things start to normalize, I believe that the lasting impact of the Coronavirus on the Supercar market will be immense and play out over a number of years.  In many markets a high percentage of new supercars are leased or financed.  With economies plunging towards recession, a large number of these cars which are 1-3 years old are going to find their way back onto the market quickly.  Supply will quickly swamp demand and prices will drop. This will put enormous pressure both on new supercar prices and accelerate depreciation on older used supercars in the 3-10 year age bracket.  The large increase in supercar production in the last decade via the entry of new manufacturers (McLaren) and significant increases in volume from the establish brands (Ferrari & Lamborghini) has created what will now be a very toxic situation when it comes to residual values until the oversupply is removed from the market which will likely take several years.  While Ferrari, Lamborghini, and McLaren all have deep pocketed parents or shareholders, Aston Martin looks to be in a very precarious position.  2019 was, in the words of Aston Martin CEO, Andy Palmer “a very disappointing year,” and now Aston has bet the house on exactly the last sort of car that will be in high demand in the next couple of years, a $200k luxury SUV, the DBX.  Older supercars, like the Ferrari F355 or 550, will likely hold their current value a bit better as they have already dropped in price significantly over the past several years.

In addition there will be significant carnage among the large number of Micro Manufacturers that have emerged in the last several years (Micro Manufacturers).  Those without deep pockets or an established client base are unlikely to survive.  The few Micro Manufacturers which are built around resurrections of long dormant brands are the ones I would guess will be most likely to be returning to the morgue shortly.  If I had to bet on one that will survive, it would be SCG as they have both the funding and business plan in place to make it long term.  

Furthermore, the demand for new Hypercars, which was already hitting a saturation point (Too Much of a Good Thing) is going to head south quickly.  I would expect a wave of cancelled deposits on all but the most sought-after models.  Those models with low build numbers, produced by well-established manufacturers (Ferrari, McLaren, Pagani), which have defendable pricing will do the best.  The last generation of limited edition hypercars (No Longer the New New Thing) were already yesterday’s news and yesterday just got a lot less interesting.  In fact, both the McLaren P1 and Porsche 918 were already changing hands below their original list prices and this will only drop further.  My guess is they, along with the LaFerrari, have another 20-30% to fall.  Maintenance and running costs do still matter and will now likely play an even larger role in driving valuations.  A $120k+ battery replacement or $5k+ service on a McLaren P1, 918 or a LaFerrari just isn’t a cost most people will be looking to take on these days.  Ferrari Enzos, F50s, F40s, 288 GTOs, and Porsche Carrera GTs will all likely experience similar drops in values as many financially stretched owners have to unfortunately unload assets.  Of these four, perhaps the largest risk is the Carrera GT.   In my last market update, I mentioned that there seemed to be a large number of ultra low mileage Carrera GTs on the market.  My guess is these ultra-low mileage CGTs were purchased as investments (they certainly aren’t being driven and enjoyed).  In this current climate those owners will very likely want out, and quickly.  Question is, will this drive Carrera GT pricing back to 2014 levels?

Perhaps the biggest question right now is regarding Koenigsegg.  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) when one has shown up at auction.  That changed as of Nov 2019, an Agera R sold for 60% of the low estimate and in Jan 2020 a CCX was a no sale.  The question is does the pricing bubble on Koenigseggs now finally pop, and if so, how far do they fall?

Of all the cars listed in the original auction results update list, what will now happen to the values of the Ferrari 365 GTB/4 Daytona and similar cars from that era is the great unknown.  In general, 50’s and 60’s Ferraris appeal to older collectors that grew up lusting after these works of automotive art.  The Coronavirus has taken its deadliest toll from exactly this group of enthusiasts and collectors.  It’s a sad and tragic situation that will likely have a major negative impact on demand.

In summary, right now we have a market that is basically frozen.  The situation isn’t likely to change for at least another month or two, and perhaps much longer.  The Coronavirus is causing a global tragedy and economic meltdown unlike any we have experience in our lifetimes. Once things start to normalize, and full normalization is unlikely until a vaccine is available, the impact of the Coronavirus on the Supercar market will be immense and play out over a number of years.  Not all manufacturers will survive, and many of those that do will have much more modest ambitions.  There will be a few manufacturers which had the foresight to reduce production and build a financial cushion that come out ahead.  All of the above is just my opinion and in this case I really hope I’m wrong.

Thoughts and comments? Please see the comments section below.

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2 Thoughts on Supercar Market Update – Q1 2020
    Julian Sunley
    1 May 2020
    1:20pm

    Very interesting thoughts and mirror what I feel is also likely. A key issue seems to be many having bought cars they can’t really afford by using finance of varying types and this is where many may come unstuck rather than owning a car outright with an intention for longer term ownership and hence short term valuations in value being of less interest as no short term sale planned.

    The newer car auction sites like ‘Collecting Cars’ and ‘The Market’ here in the UK are proving interesting watching at present to see actual sold values (where reserves are met and they are indeed sold) rather than just what dealers are listing cars for that seem to stay in stock for a long time.

    I am very much of the camp that feels cars should be bought that you like and to be enjoyed and whilst an eye on the future value is always prudent a purchase based purely on speculation and/or where as car is not going to be driven or you have no love for it is much more of a risk than some may have previously thought and for those the current situation could well deliver a hard lesson.

    Keep the blogs coming please, always interesting reading. I also like the fact you have enjoyed your Grancabrio as I have wanted one of these ever since I drove the old 4.2 Granturismo coupe a number of years ago despite them getting a lot of stick in a lot of car reviews. Yes they are old tech’ but the noise with the exhaust valves open and the looks for me make them a great car regardless of an outdated sat-nav (until the revised version came out) and not being super quick.

    Cheers, Jules

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    RIchard Hawken
    3 May 2020
    8:22am

    Interesting read, and not too far from our thoughts here at EMM London; but we are perhaps a little more bullish on certain marques and models. We run a HNW Private Office which is essentially a luxury automotive concierge serving some of the wealthiest, astute collectors on the planet. We also run a regulated investment fund specialising in collectable cars as an asset, but have put capital raising on ice currently. As a result we keep a very close eye on the market via auctions, online data but more importantly from the sentiment of the buyers and sellers directly.

    We are in the midst of finalising our report on the first four months of 2020 which will be released soon, but we are taking a much more “be greedy when people are fearful, and fearful when people are greedy approach” to this, as my remote mentor Warren Buffet would say. As you’ve highlighted there will definitely be forced sellers of sorts, but I don’t expect it to be that noticeable and certainly not in the Premier League sector. Modern McLarens, Porsches, Astons and Ferrari’s are sure to suffer as they are aspirational, finance funded cars. Lamborghini however I fear will suffer a much sharper correction as they are ‘the’ most leveraged super car on the planet by the modern Yuppy (showing my age now) generation. Expect to see cheap Huracans all over Ebay Motors and Auto Trader soon. Don’t get me wrong, they’re fab cars worthy of a daily driver for the right price!!

    Let’s remember in 08 capital flowed into collector cars due to the safe-haven status of being negatively correlated to the S&P. Working at an investment bank back then I was happy I had already collected some 8 -10 cars of my own as I saw my share options, halve, halve again and then fall to about the same value as a Starbucks coffee. We were also in a very different interest rate environment back then with lenders all but withdrawing high LTV products, especially on cars which were then still quite embryonic as an asset class, but the real wealth didn’t blink an eyelid – like now.

    The following decade [in collector cars] produced tax free returns of over 300% [end 2018] according to Knight Frank’s Luxury report, outperforming every other market. So how different is this? Well we’ve identified with the ageing population’s exposure to risks from Covid-19 too and I think we can already see that in some models being offered to us to market, such as a pair of 250GT Californias. But the hardest hit country Italy does have a large and ageing population, as a percentage don’t own that many high-value collector cars. Certain cars can afford a correction to attract a new breed of younger enthusiast who don’t see them currently worth a $12m price tag. There’s no denying their beauty though so as we move to automated, driverless boxes on wheels, a V12 with no roof or safety aids, styled by the artist Pininfarina will be a very attractive asset forever, it’s just a function of price.

    So we would advise, be brave, look for the car you desire and make your market. Investing has never been about luck. If you keep watching for the right moment, you’ll miss it.

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