Hypercar & Supercar Market Saturation
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.
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.
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.
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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