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Planning Our 1st Epic Drive of 2021

Planning Our 1st Epic Drive of 2021

I have hope that things will get better this year with the roll out of the Covid-19 vaccines and that by September or October a road trip will be possible.  In great anticipation, I reached out to a group of friends with whom we have been doing road trips for over a decade now to gauge interest.  It’s a great group of people and all have extensive track or racing experience (Road Trips & Driving Talent).  We call these trips, the “Epic Drives” because, well, they are (Epic Drive 2017 Pt 1).  The response was immediate and spectacular.  Everyone was in and the excitement was palatable.  The idea of not just being able to go out for a great drive, but also to stay in a wonderful place and enjoy both great company over great food is incredible enticing.  Pulling it off will not be easy but where there is a will there is a way.

As the Epic Drive Group is ten couples/cars coming from 5 different countries, the logistics of just getting everyone together can be daunting.  The trips normally run 5-6 days including the day’s drive to the meeting point, and a day’s drive home. In the past, the mix of cars has included a few Ferraris, McLarens, a Lamborghini, and on occasion a Porsche.  Throw in Brexit, a pandemic, and it gets even more interesting.  As 8 out of the 10 participants are based in Europe, it was a fairly easy call to decide this year’s Epic Drive would be on the east side of the Atlantic.  In the past, we have held the Epic Drives in Wales, Scotland, Switzerland, Germany, France, and Italy.  For 2021, given all the uncertainty, we decided that a new destination is out and that it’s better to go back to one we know.  Choosing from the past list isn’t easy as they have all been terrific destinations.  However, a few have been dropped as options for a range of reasons.  Switzerland is out as the Alpine passes are likely to be closed by Sept/Oct. Italy and Germany are the most difficult for the majority of the group to get to, and so were also eliminated.  The remaining contenders are France, Wales, and Scotland with France or Scotland likely to be the final choice.  Both offer a combination of great lightly trafficked roads, excellent accommodations, great food, and spectacular scenery.

If we do choose to go to France, the itinerary will most likely take us across Normandy to Brittany and then down into the Loire Valley.  When setting the daily routes, I try to target 200-300 miles per day over 5-6 hours of driving.  It doesn’t sound like a lot, but on back country “D” roads that require high levels of concentration, it can be quite taxing.  This type of trip will involve multiple different hotels as we move west, south, and then back east across France.  We will likely stay at a number of Relais & Chateaux properties as they are consistently excellent in terms of both accommodation and food.  The upside to this sort of trip is you do see a lot more places and get to sample a variety of great hotels.  The downside is more complicated logistics and lots of packing & unpacking.  Having spent a fair amount of time in the past driving through the area, there are some excellent back country roads, lots of historic sites to stop at, and wonderful hotels.  The food is outstanding and in general the reception to the cars is on the positive side.  The weather can be a bit of a challenge and the logistics for those coming from the UK is still a bit of an unknown.  The French also drive on the proper side of the road which makes things much easier for the majority of the group (the British Government originally decreed in 1773 that one should ride/drive on the right as it allows you to keep your sword hand free, they then never bothered to update the practice when carriages became horseless and the public wearing of swords was outlawed).

Scotland would be a bit of a different type of trip.  For Scotland, instead of being a moving caravan from hotel to hotel, we would pick a central location and then do day trips out from there.  Our base would likely be in the Inverness area, as it’s easy to plan great day trips looping east, south east, south west, and finally up into the great north west peninsula from there. There are fantastic roads devoid of traffic in every direction, and as long as you are being sensible, the police seem to be understanding.  On a past trip, we rented out a castle on Loch Ness which was both spectacular and spectacularly expensive when a large part of the group decided to do a tumbler tour of rare Scottish whiskies one night.  The upside to this sort of arrangement is the logistics are much easier, you don’t need to worry about packing/unpacking and checking in/out of a new hotel every day.  In addition, if one of the group decides they want to take a day off from driving, they can.  The downsides are far less gastronomic variety and loss of the adventure of landing someplace new every night.

Where we finally decide to go, if we can go, will likely be driven by what the local pandemic rules are at the time.  While I would hope and expect everyone in the group to have been vaccinated by the time we go, that isn’t a given.  As we are coming from 5 different countries, each will have their own system of priority and different levels of vaccine supply.  What the entry requirements for France and the UK will also likely play a key role in deciding the location as any on-going testing requirements both at the border and in hotels could complicate matters.  If you need a Covid-19 test that’s no more than three days old before you check into a hotel, the logistics of getting everyone in the group tested repeatedly will likely rule out France given we would be moving hotels on a daily basis.  Another complication will be sorting out what the car insurance and documentation requirements are now with the UK having left the EU. 

 

While it’s all definitely a lot more complicated than it has been in the past, the idea of getting together with wonderful friends and going on a great road trip is absolutely tantalizing.  The key is to be able to do it safely in an environment where we are all comfortable.  So many of the things that we used to take for granted, now we simply can’t. If we can pull off an “Epic Drive” this year, I suspect it will be remembered as our best yet, even if it really is not just because everyone is so excited about the possibility.  As one of guy’s said, “Oh to be more than 5km from home… right now I’d go anywhere, and in any car!”

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Supercar Market Update – Q4 2019

Supercar Market Update – Q4 2019

Supercar Market Update – Q4 2019

Following up on the Q3 car market article (Car Market Q3 2019), I’ve continued to track the Ferrari F355, Ferrari 365 GTB/4 Daytona, and the Porsche Carrera GT, as I believe these are good bellwethers for the market in general.  On occasion, I also take a glance at Koenigseggs, the McLaren P1, 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.  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 Q4 results of interest are:

NA Mile 1973 Ferrari 365 GTB/4 Daytona, Sold $484k

6k Mile 1970 Ferrari 365 GTB/4 Daytona, Not Sold at High Bid $700k

NA Mile 1972 Ferrari 365 GTB/4 Daytona, Not Sold at High Bid $500k

2k  Mile  2004 Porsche Carrera GT, Not Sold at High Bid of $735k

36k Mile 1995 Ferrari F355 GTS 6-Speed, Sold $48k 

33k Mile 1996 Ferrari F355 Spider 6-Speed, Sold $76k

26k Mile 1996 Ferrari F355 Spider 6-Speed, Not Sold at a High Bid $45k

600 Mile 2014 McLaren P1, Sold $1.27 mil

1,200 Mile 2015 McLaren P1, Sold $1.12 mil

175 Mile 2015 Porsche 918, Not Sold at a High Bid $1.05 mil

700 Mile 2015 Porsche 918, Not Sold at a High Bid $875k 

550 Mile 2015 Ferrari LaFerrari Sold $2.2 mil

1,200 Mile 2014 Ferrari LaFerrari, Sold $2.3 mil

2,700 Mile 2014 Koenigsegg Agera R Sold $1.35 mil

Which are very consistent with the trajectories seen in Q3.

If the speculators weren’t gone before, they have certainly left the building now. The last generation of limited edition hypercars (No Longer the New New Thing) are yesterday’s news.  In fact, both the McLaren P1 and Porsche 918 are now changing hands below their original list prices.  The people buying supercars today are collectors and enthusiasts.  The collectors only want the best low mileage examples and the enthusiasts want cars they can actually use, enjoy, and afford to keep on the road.  For this second group maintenance and running costs do matter.  A $120K+ battery replacement on a McLaren P1 or a $8k cambelt change on a Ferrari F355 are significant expenses that impact values.  Demographic shifts are also playing a role as the younger generation entering the market has been raised on cars with plenty of driver’s aids and only two pedals to navigate.  It’s pretty easy to put in an impressive lap time in a Ferrari 488 Pista after just a couple of hours out on a track.  Try pushing an F40 to the limits after just a few laps behind the wheel and it is likely to end in (expensive) tears.   

When looking at the each of these cars, different factors are impacting values.  Of all the cars listed above, the Ferrari 365 GTB/4 Daytona wins the award for most demanding to drive, by a considerable margin.  If many of the 50’s classics can be described as “tractors to drive”, by the late 60’s they had evolved to slightly more driver friendly “trucks”.  If trying to navigate a Daytona around town is a full upper body work out, getting a Daytona to slow down sufficiently when entering that town can be an underwear soiling experience ( Driving a Daytona ).  Not too long ago a lot of speculators scooped up Daytona’s expecting them to be the next $ 1million Ferrari.  When that didn’t happen, a lot of these cars started reappearing on the market with the odometer having barely, if at all, moved.  Sellers outnumbered buyers and prices started dropping.  The number of Daytona “no sales” at auctions over the last several years is exceptional high and that trend has continued in the last several quarters.  For today’s coming of age enthusiast, the Daytona is ancient history and not the car they lusted after in their youth.  About two years ago I expected Daytona’s to retreat back from $700k to $500k.  Recent results are already under the $500k level and I would not be surprised if Daytona’s drop to $400k in 2020.  

Much to my chagrin, as the Carrera GT has been high on my bucket list for several years now (Garage Goals), Carrera GT values are holding steady.  Many of the same factors that have been driving Daytona prices south, have been supporting Carrera GT values so far.  CGTs are the cars that the new generation of buyers lusted after in their youth.  New tire technology has made CGTs significantly more drivable and a track outing is far less likely now to end in a life insurance payout.  Where I do see a bit of a disconnect with the CGT though is between its reputation as being one of the greatest driver’s cars and the fact that of the 11 CGTs currently listed for sale in the US, 4 have under 1,000 miles on the odometer and only one has more than 5k miles.  Even the highest mileage car listed, at 7,134 miles works out to an average of under 500 miles per year.  If I look at Ferrari Enzos, which are a similar age, 3 out of the 5 sold at auction this year are well over 5k miles. Whereas many Ferrari owners are very sensitive about putting miles on their cars, Porsche owners tend to be the opposite.  The question therefore is why, if CGTs are such great driver’s cars, are so many not getting driven?  My guess is these ultra-low mileage CGTs were purchased as investments and now that it’s clear that prices have stabilized, those owners want out.  Question is are these owner’s patient enough to ensure that demand and supply stay balanced or do a flood of low mile CGTs now hit the market driving price back to 2014 levels?

I believe the Ferrari F355 is today’s “starter” Ferrari (Our 1st Ferrari).  With prices continuing to slowly recede into the $40-50k range, the F355 is just a bit over half the price of a new Porsche 718 Boxster.  The F355 is modern enough so the learning curve is short, and it’s got enough drivers aids to provide a decent level of comfort for the less experienced supercar driver.  The F355 is usable car by supercar standards with enough luggage room for a multiday trip which certainly aids in its appeal.  It doesn’t hurt that the F355 is one of the prettiest Ferraris to ever emerge from Pininfarina’s pen.  Given Ferrari built over 10,000 F355s there are always plenty for sale and a strong community of owners who can be called upon for support.  F355 prices will also be held down by very high maintenance costs.  Cambelt changes every four years and a long list of known issues will always make this an expensive Ferrari to own. My guess is F355s are now well priced and will hold around current prices.

Koenigseggs have operated in a very different value universe for multiple years now.  In less than a decade Koenigseggs have gone from little known to quite famous.  Prices on their new cars have risen astronomically and they have developed quite a following.  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.  I’ve also seen a number of used Koenigseggs move from dealer to dealer with ever inflating prices so what they are really worth to a buyer who actually is interested in owning and driving one, is hard to tell.  However, recently a 2,700 mile 2014 Koenigsegg Agera R was sold at auction for $1.35 mil. (vs. an estimate of $2-2.5 mil).  The original list price on an Agera R was $2.1 mil. Assuming this car was still owned by the first owner and with a few options thrown in he paid around $2.2 – $2.4 mil, each of the 2,700 miles driven came at a cost of $315.  In terms of depreciation percentage, not only has my McLaren 650S Spider done better but when compared to other similar age hypercars (P1, 918, LaFerrari), this Agera R is by far the worst performer in terms of holding value.  The question is does this result finally pop the bubble and put Koenigsegg’s whole inflationary pricing strategy at risk.  

In summary, the Porsche Carrera GT is at a potentially interesting inflection point. Prices may continue to hold, or a modest drop may be in the not too distant future if many of the “investment” acquisitions of the 2012-2016 era are dropped back into the market. Both the Ferrari 365 GTB/4 “Daytona” and the F355 rode the market up in 2013-2016 and while the F355 has more or less settled, the Daytona will likely still fall further. Koenigseggs prices might have just had their Titanic moment, with a large hole now ripped in the side of their pricing strategy. 2020 will certainly be an interesting year.

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Our 1st Supercar: Ferrari F355 GTS

Our Genesis Supercar Ferrari F355 GTS

Our 1st Supercar: Ferrari F355 GTS

I really like the memories that the #day1challenge, currently circulating on Instagram, is generating. It has brought back a ton of recollections about the wonderful cars that we have been fortunate enough to have owned over the years. In many cases we acquired cars in different countries in Europe and promptly drove them back to the UK or Portugal. This “buy and drive” tradition all started with when we acquired our first supercar, a Ferrari F355 GTS back in 2002. If knowledge is a combination of experience and study, my base starting point with the F355 GTS was incredibly green and naïve.

How green and naïve? Well I acquired the F355 GTS from the Ferrari Dealer in Brussels and arranged to pick it up on December 30th with a plan to then drive it from Brussels to Lisbon. Prior to collecting the F355 GTS I had almost ten minutes of seat time in a Ferrari. Handover was done by one of the mechanics as all the salespeople were on vacation. It basically consisted of here are the car’s documents, keys, alarm fobs, and the car. Within 10 minutes we were done and I was headed out towards Paris. What the mechanic failed to tell me was how the car alarm and the separate immobilizer worked. I’m not sure even if he had tried, I would have understood as we had a major language gap. As the car was running when it was handed over, I didn’t think to ask. This led to a rather embarrassing few minutes when I stopped for gas the first time. By the time I got the F355 GTS started, my face matched the cars color.

The drive to Lisbon took three days as I tried to avoid highways and use the great country roads in both France and Spain. I got extremely lucky in terms of the weather and only had a few hours of rain and no snow during the entire journey. Had I run into a snowstorm, which was quite feasible given the time of the year, I would have been in a huge amount of trouble given I was not running on winter tires. When I stopped for the 1st night, I took all the car documents in with me for review. I noticed that the service book had not been stamped for the service that was supposed to have been done prior to delivery but assumed that was just an administrative oversight. The F355 GTS also sounded louder than I remembered a friend’s had.

Shortly after I arrived in Lisbon, I took the F355 GTS into the local Ferrari dealer as the notorious “check engine 1-4” light had come on. Upon inspection, it turned out that the catalytic converters had been removed and the car had not been serviced in two years. In fact, none of the work that was agreed would be done pre delivery had actually been completed. To their credit, the Ferrari Brussels Dealership did step up and covered the cost of getting all the work done in Lisbon. Lesson learned though, go through all the documents and thoroughly check the car over before taking the keys.

Looking back, picking up a car in late December that I had never driven before and then driving it 1200 miles across Europe was fairly insane and probably downright stupid. The fact that none of the service work had been done and I escaped without having any mechanical issues was a near miracle. When I realized just how naïve I had been through the whole buying processes, it served as a great learning experience that I vowed never to let happen again.

We ended up keeping the F355 GTS for about 2 ½ years before trading it in for a Ferrari 550 Maranello. Over the many miles, I learned and bonded with the F355 GTS. The F355 GTS taught me how to go over speed bumps at an angle to avoid scraping the nose after multiple mishaps. It was a fairly fragile car and it did make multiple trips to the local Ferrari dealership to have various items fixed. The most significant of these issues was a leak in the fuel hose. I was very lucky not to have been roasted. Fortunately, when it happened, I had the roof panel off and smelled the fuel being sprayed into the engine bay. I immediately pulled over and had it flat bedded to the dealership. The most disconcerting thing about the attempted flambéing was the mechanic told me it was a not uncommon issue and that they had another clients F355 burn to the ground. In terms of driving the F355 GTS, I do remember vividly that the engine loved to rev and was spine tingling near the redline. The steering was unnervingly light, but it did handle like a go-kart. Overall the F355 GTS was a great introduction to supercar ownership, both its highs and its lows.

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Hypercar & Supercar Market Saturation

Too Much of a Good Thing

Hypercar & Supercar Market Saturation

Never before have so many different manufacturers announced cars in the $1 million plus category. If competition is supposed to raise everyone’s game, then the cars we should be seeing on the road (or more likely mostly stashed in private collections) in the next few years should be extraordinary. However, I’m concerned that this isn’t quite how things work in the hypercar market. The delicate balance between supply and demand that has been established and carefully nurtured by the major supercar manufacturers over the past few decades appears to about to get tipped in the wrong direction. Throw in rapidly increasing price points, a slowing global economy, Brexit, and the on-going trade wars and it looks like history might just repeat itself, and not in a good way.

The 90s

The funny thing is, in many ways we have been here before. The supercar/hypercar market in the early to mid 90s had a lot of similar characteristics. A number of new players entered the market either via reviving a dead brand (Bugatti Automobili S.p.A) or as completely new entrants (Cizeta, Vector, Venturi, McLaren), and existing car manufacturers deciding to enter the hypercar segment (Jaguar). To make things even more interesting, you had Ferrari dropping about 1000 more F40s than originally announced into a huge market bubble that then went bang. The resulting carnage of oversupply, a market headed into a recession, and over hyped speculation was impressive. The first reincarnation of Bugatti went bankrupt after producing only 139 EB110s. Jaguar ended up well short of the 350 planned production run on the XJ220s and still had unsold units sitting in showrooms 3 years after production ceased. While the McLaren F1 is considered by many to be the greatest modern supercar today, back in the 90’s, McLaren struggled to sell F1s. Of the original planned production run of 300 units, only 106 units left the production line (despite asking politely and offering to pay full list price, McLaren has refused several times to allow me to place an order for one of the remaining 194 F1 chassis numbers). Cizeta, Vector, and Venturi have all long since disappeared into the dust of history.

2020+

Today we sit in a not to dissimilar situation. We have a global economy that is slowing with a huge amount of uncertainty being generated by both Brexit and the Trump trade wars with predictions that a recession is around the corner increasing by the day. There are a large number of brands that have recently reemerged from the grave and announced new limited-edition supercars including De Tomaso, Apollo, Pininfarina, and ATS. After being out of the hypercar game for nearly a decade following the lukewarm reception of the One-77, Aston Martin is back with a vengeance with two cars coming in the next three years. Both Mercedes & Lotus have $2 million plus projects well underway and SCG has announced that they will build 25 road legal versions of their Le Mans LMP1 Hypercar. You also have the track only Brabham BT62 and yet to be named just announced Lamborghini. Then just to make things a bit more interesting, Gordon Murray has jumped back into the game and announced that he will be building a spiritual successor to the McLaren F1, the T.50, of which 100 examples will be built with a price tag of $3 million each.

While all of the above are new entrants to the limited-edition/hypercar segment, the two biggest established manufacturers have also vastly accelerated their normal model launch cadence and broadened the number of different market segments they are developing models against. Ferrari has launched the new limited edition Icona line starting with the Monza SP1 & SP2, both built off the 812 platform. Ferrari has also added the SF90 Stradale to its regular production portfolio with the SF90 sitting in-between the supercar and hypercar categories. McLaren, which waited 20 years between the F1 and P1, closed the gap to 4 years between the P1 and Senna and now has two more hypercars, the Speedtail and Speedster, in the pipeline for delivery in the next two years. All of this is on top of Bugatti, Koenigsegg, and Pagani’s plans and doesn’t even take into account the P1, LaFerrari, and 918 successors which will probably arrive in the next 5-6 years.

Buyers

While all of the above is not a comprehensive list, it still represents a huge increase in the supply of cars over the next several years in the limited edition/hypercar market segment. While the volume of cars certainly is increasing exponentially, I’m really not sure the number of potential customers is expanding as rapidly. In fact, if anything I can see an emerging wave of concern among many who have been buying these sorts of cars for a long time. In general, I believe there are 3 groups of hypercar/limited edition buyers:

  • The immensely wealth for whom retained value is inconsequential and having the new new thing is what matters most. Their behavior is likely to remain unchanged.
  • Speculators will vanish overnight at the first signs of a change in the historic model of rapidly increasing values for the “new new thing”
  • The very well-off enthusiasts who is both buying a car to enjoy and an asset that he/she expects to retain value.  This group is going to become increasingly selective, and in some cases, if the downside risk looks to great, will depart the limited edition/hypercar market all together.

Added to the uneasiness on the demand side you also have the continued threat of US tariffs on European cars which could add 25% to the invoice price and crack downs on displays of wealth in China.

Winners & Losers

My guess is there will be a few clear winners and losers. The winners will be cars that have a purity of vision and age well. Technology showcases that are outdated quickly will struggle over the long term. While the Pininfaria Battista is a beautiful work of art, I just can’t imagine an electric car, even a $2.5 million one, aging well and ever achieving classic status. Same holds for the Lotus Evija, given Lotus’ challenges in getting its base portfolio updated, the Evija seems like a massive unneeded distraction. The ATS GT looks like a rebodied McLaren 12C and my guess is ATS will quickly revert to its former comatose state. Apollo & De Tomaso share an owner and from what I understand the De Tomaso P72 is based off the Apollo Intensa Emozione. While the P72 has certainly gather lots of interest on Instagram, I doubt that interest will turn into the number of deposits needed to give this latest iteration of De Tomaso long term viability. The Gordon Murray T.50 sits right at the high end of this group at $3 million each. Gordon’s name gives the car instant credibility and the fact that Murray is only building 100 T.50s certainly tics the exclusivity box which bodes well for the T.50 having the potential to be a long-term winner in this group. For this to happen though, the T.50 can’t just be a one-off unicorn and a long-term service support network needs to be established. It’s too bad that the T.50 isn’t being developed as a joint project with McLaren. If it was, I believe it would be the one “must have” car out of this whole group.

Of the large established manufacturers, the Aston Martin-Red Bull Valkyrie looks like a sure winner, but the Valhalla is a tougher call. The partnership with Adrian Newey and Red Bull adds a huge amount of credibility to the cars but Aston Martin’s recent financial performance is very concerning. If money gets very tight, it could impact development for the Valhalla which is still in early stages. Aston will also need to resist the urge to spin multiple variants off the Vahalla if it is going to hold value long term.

The Ferrari Icona line seems like the antithesis of everything Ferrari has ever stood for. Ferrari has always been a forward leaning organization where the next car was a leap forward on the last. While the SF90 tics all the right boxes, the Monza SP1 & SP2 seem like a shameless tactical exploitation of their back catalog. While I am sure Ferrari will sell every unit they produce, I do wonder how many would actually be spoken for if you didn’t have to raise your hand to avoid losing your place in line for the next Enzo/LaFerrari.

McLaren has probably been the most aggressive of the established manufacturers in the Hypercar segment with multiple models all launching in a very short time frame. While each is clearly positioned against a different market segment it is still a large number of $1 million plus cars chasing the same pool of buyers. Long term I can see the Senna doing well as similar to the F40, is has a purity of focus and is not encumbered by an overly complex hybrid system (full disclosure, I do have a Senna). The Speedtails will always be collectable given the low build numbers and uniqueness of the center driver’s seat concept. The recently announced McLaren Speedster is a tougher call as details on the car are still very high level.

Last but not least, the Mercedes-AMG One seems to be well behind schedule. How the “One” stacks up against the Valkyrie on both road and track will determine if it is a success or an overly complex misfire.

Summary

While almost all of the above hypercars are highly desirable in their own right, the laws of supply and demand don’t change. Almost all of these cars are chasing the same group of buyers. Even if you take affordability out of the equation, how many of these buyers will want to be adding multiple $1-3 million cars to their collections every year? The answer to that question along with how many buyers are still comfortable buying a $1 million plus a car that might not hold value, will determine just how this market plays out. If history is a guide, it could get ugly.

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