Back in July, I summarized the situation among supercar manufacturers (Supercar Market Q 2 2020) as:
So where are we three months later if we look at the manufacturers, future limited-edition supercars, and both the main and high end of the supercar market? Starting with manufacturers, all have cut volumes through both Covid-19 driven manufacturing plant closures and planned voluntary reductions. While Ferrari, Lamborghini, and Porsche all look to be in fairly solid positions financially, McLaren has had to rely on its deep pocketed controlling shareholder to arrange a loan to solve a major liquidity shortfall. This is on top of the £291 mil. injected into the business in March which has already been spent. McLaren should be able to weather the balance of the year now, with both the Formula 1 season starting this weekend and car sales resuming. Aston has had an even more exciting quarter. Aston Martin finally parted ways with Andy Palmer, the CEO for the past several years, installed a new regime headed by Lawrence Stroll, and recently announced a £152 million new share float at a price of 50 pence per share, which is 2.6% of Aston’s IPO opening price back in Oct 2018. How this chapter of the Aston Martin story ends now all depends on the DBX, a $200k luxury SUV launched into the worst economic situation this century. I have no information on how Pagani or Koenigsegg are doing but I suspect both are fine. I believe Scuderia Cameron Glickenhaus (SCG) is in good shape financially and is nearing completion on its new factory in Danbury, CT.
Which brings us to today. While factories have restarted production, we are still a long way from normal. 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. I have heard of multiple delays on supercar orders that had been given build start dates. This speaks directly to the supply chain challenges and with COVID cases rising in many countries, its unlikely to get better soon. While Ferrari, McLaren, and Aston Martin have all reduced their 2020 production targets (Aston Martin & Ferrari’s 1st Half Results) (McLaren’s 1st Half Results), a lot needs to go right in the next couple of months to just be able to produce the lower number of cars. On the bright side, with factories closed for several months, it did help both McLaren and Aston Martin work down their inventory gluts. More on this to follow in November when Aston Martin, Ferrari, and McLaren all release there Q3 results.
In talking to a few supercar dealers, almost all indicated that sales the last few months have been good. Both new and used cars supercars have been moving well and if anything, there has been less discounting than normal. The biggest challenge in many cases has been getting enough used stock to sell. However, this hasn’t driven used prices north, from what I have seen, they have remained fairly stable, but data is in very short supply. Where there has been some data, it has been generated by the big auction houses which have moved several of their premier events on-line. In these auctions, 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.
A few Q3 2020 results of interest are:
13k Mile 1971 Ferrari 365 GTB/4 Daytona, Sold $650k
NA Mile 1970 Ferrari 365 GTB/4 Daytona, Sold $455k
56k Mile 1971 Ferrari 365 GTB/4 Daytona, Not Sold at a High Bid of $460k
36k Mile 1972 Ferrari 365 GTB/4 Daytona, Sold $390k
27k Mile 1998 Ferrari F355 GTS F1, Sold $45k
25k Mile 1997 Ferrari F355 Spider 6-Speed, Sold $73k
35k Mile 1996 Ferrari F355 Spider 6-Speed, Not Sold at a High Bid of $62k
30k Mile 1999 Ferrari F355 Spider F1, Sold $62k
3,700 Mile 2016 Porsche 918, Not Sold at a High Bid $1.06 mil.
If you look at the longer-term trends, it is very consistent with where we were trending year ago. Ferrari F355’s have stabilized in the $40k-70k range depending on spec and Daytona’s continue to drop with the latest sale now under the $400k line. I would not be at all surprised to see a $350k Daytona in 2021. 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.
The Porsche 918 no sale at $1.06 million is a good representation of the situation in the market of the last two generations of limited-edition supercars (No Longer the New New Thing). Q3 is normally when all the big auction houses would be hosting their Monterey sales. This year all of these sales moved online. With the exception of this 918, whose high bid was $200k short of the low estimate, and one Enzo which sold at under the low estimate (the sale price was $250k less than the next lowest price Enzo sold at auction this year) there were no LaFerraris, McLaren P1s, and Carrera GTs in any of the auctions. Normally there would be at least of couple of examples of each of these going across the block in Monterey. 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. A quick look at P1s on Autotrader highlights the reality gap on pricing in this group. The lowest price P1 listed for sale on Autotrader has an asking price of $1.3 million. The highest price P1 sold at auction in the last year went for $1.1 million and the lowest was $990k (this P1 is for now sale at a dealership with an asking price of $1.34 million). The owner of the P1 which sold at $990k probably only netted between $900-920k after auction house fees. I have heard of a few private P1 sales happening at around this level which is probably where the market really sits. The same reality gap applies to the Carrera GT. Carrera GT asking prices on Autotrader have actually trended up in the last six months by around $50-70k and now are just under $800k for a silver car with around 4,000 miles on it. However, the last Carrera GT to show up at auction was a silver car with 5k miles on it which was a no sale at $570k. The last Carrera GT that sold at auction was an ultra low miles (766 miles) car which went for $710k. While the market is no longer frozen, there is a major gap of 30%-50% between where asking prices currently sit and where the last known public sales actually happened.
A quick glance at Koenigsegg indicates that it still operates in a logic of its own. Looking at a few classified sites globally, it looks like the same group of cars are listed that have been for sale for quite some time. Asking prices haven’t moved downwards recently despite having risen astronomically in the past few years. Of all the Koenigseggs for sale, the highest mileage example I could find was actually our old Koenigsegg (Our Koenigsegg CCR) which now has 7,900 miles on the odometer. It had 7,533 miles on it when I sold it in 2012. Koenigsegg’s are truly the poster child for the low mileage crowd (The Tyranny of Low Mileage).
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. On top of the seasonal change, stimulus payments have dried up and its leading to a second wave of unemployment. A good example of this is American Airlines laid off 19,000 employees on October 1 after the initial Covid relief package funding ended. 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.
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