Supercars – putting bumper stickers on a Bentley
Supercars are a passion investment but the market has cooled. If you are looking for a quick profit, look elsewhere. But if you are looking to invest as a purist and for the roar of the engine, then you’ll be welcomed into the club with open arms.
Too much of a good thing
There are many reasons to buy a supercar: the thrill of the drive; the opportunity to own something rare; perhaps to trade for profit or just to be the envy of others as the engine roars up to Annabels. Just a few years ago, those lucky enough to get their hands on a LaFerrari would have seen it double in price in a matter of days following its launch, but since then the market has cooled, as it has with art, in part due to the pandemic. “The days of walking into a dealership and driving out of the garage having made a profit are over”, commented Damen Bennion of Bennion Law, a specialist automotive law firm. The reason? Too much product in the market, mixed with the dampening effect of COVID-19 lockdowns. “The supercar market is suffering from a real excess of supercars”, described Olivia Cooper, Head of Private Wealth & Family Office, Axiom Stone Solicitors. “The manufacturers themselves could be said to be ‘killing the goose that lays the golden egg’ by bringing out too many models, too often”.
Logging on inertia
As for COVID-19, it can’t be solely blamed for the market cooling, according to Damen. But it certainly hasn’t helped. As with all areas of life, the selling of supercars has also had to go online and while sales are continuing, the process itself has taken away some of the passion that clients are looking for when making a purchase. Olivia explains: “The purchase transaction is part of the experience, part of the enjoyment. It often starts with a visit to the factory, to see the launch of the concept, quickly followed by the launch of the mock-up vehicle” – and so the excitement builds: sitting in the car, feeling the leather and talking with other enthusiasts. As one quote confirms “Asking someone else to drive your sports car is like asking someone else to kiss your girlfriend.” The journey allows a real desire to build.
Moving on to specification phase, where the collector has the great enjoyment of selecting from a whole host of options from bodywork and colour to interior gadgets, seats and trims, Olivia has clients who will only collect a certain marque and then the car has to be a certain colour so an entire collection will match. “It is very difficult to build that love affair with a car when the process is entirely online”, she said. In fact, she has one client who flatly refuses to partake in the specification process over a zoom call and is waiting until he can do this ‘face to face’.
Buying the dip
Rather than be disheartened by the market cooling, enthusiasts feel quite the opposite. The market has been plagued by ‘flippers’ in recent years and for true car enthusiasts and collectors, these are “the worst”, said Olivia. The manufacturers tried to bring in specific measures to combat the practice of flipping such as terms of ownership to own a vehicle for a specific period of time before you can sell, penalties for breach, and qualifying provisions stipulating that the potential buyer needed to have owned other vehicles from the manufacturer to be eligible. “They worked to some degree”, says Olivia.
The Hand of Fatima
Where they didn’t work, COVID has appeared to intervene like The Hand of Fatima. Without the quick returns, flippers are learning the true cost of owning a supercar. “I’ve had calls from brokers and dealers offering supercars with huge discounts, some well over thirty percent depreciation on the purchase price”, said Olivia. “The upshot is that hopefully the market will return to the collector and long term investor; for now ‘car-flipping’ is over and it will probably be some years before we see fast buyers back in the market, if at all – so in this way the pandemic has had one positive impact”, explains Olivia.
We spoke to James Banks, founder of LaSource, a membership club for car enthusiasts facilitating market sales between buyers and sellers. All members are qualified by LaSource before being given access to the collection. James said, “distance selling most certainly is happening. The Gordon Murray T50, a £3million V12 hypercar available through LaSource completely sold out having been revealed in August 2020. Buyers can specify their car virtually, picking colours and options, but the difficulty at the moment is the test drive”. Although he does add, “test drives however aren’t really necessary at a supercar level; everyone knows they’ll drive beautifully.”
To facilitate a sale, first and foremost, you’ll need an expert. “The independent specialist inspection has become increasingly important”, said Olivia. Collectors will commission an independent expert to examine the vehicle in question and provide a report. “I’ve recently worked on a transaction for an American buyer and seller, with the car sitting in the UK. It was inspected by the client’s expert, and the buyer proceeded with the purchase. Clients place enormous trust in their experts, and they might have a collection manager too”, says Damen. “Some of the largest transactions take place without the buyer ever physically seeing the car”. James reported similar: “During the first lockdown we were asked to inspect a car on the other side of the world via zoom of all things. The client went on to make an offer of close to $20m. In this sector the histories and ownerships of these cars are so well documented, you are assessing them more in the way you would fine art, than you would a car.”
Lawyers themselves are also increasingly important for conducting due diligence, ensuring the seller has the authority to sell, and providing advice on the best possible ownership structure. Photos are important with some resembling ‘dossiers’ according to Olivia, with pictures, the entire manufacturer’s details of the car and the personal specification of the vehicle, as well as its pedigree and history. As are the video calls between parties to show off every aspect of the car and answer questions. And lastly, you’ll need patience. “The purchase process time has increased, especially on cross-border sales”, added Olivia. “It takes time to build the passion and rapport without the face-to-face opportunities”.
A trend to watch for in the supercar space is the impact of the sustainability agenda. There is a rapid move towards electric cars in the mainstream automotive sector, and to some extent in the high-end car options too. “The Ferrari SF90 Stradale is a dedicated plug-in hybrid supercar, and many others are following suit. What’s more, you have businesses like Rimac Automobili in Croatia producing not only their own 250mph electric hypercars, but also all-electric performance components for Porsche, Koenigsegg, Pininfarina and many more. In fact, this all-electric business is rumoured to be acquiring one of the most emotive performance car brands of all time, Bugatti, in 2021. Electrification appears to be the near-future for the supercar market”, commented James.
Balancing the green P&L
That said, there is an argument that “a supercar that is rarely driven and might go to a few events a year, has a minimal impact on the environment in terms of its emissions”, said Damen. It’s an interesting dilemma, and for Olivia it comes down to: “how does one define sustainability”.
“Personally, I have not had any client ask me to source the fastest electric car and I don’t foresee this happening in the near future. That’s not to say supercar owners are climate change deniers – for their daily drive sustainability is a prime focus, likewise with their investment criteria. When it comes to supercars, sustainability is being sought in other ways”, said Olivia. She recalls a recent trip to Aston Martin, pre-pandemic: “I was shown how the use of new technologies is not just concerned with the construction of a vehicle but in streamlining the planning, energy use and wider environmental impact reduction. It was truly fascinating”. There’s also a move towards sustainability in the use of recycled, recyclable and organic materials, as well as in interior materials choices. For example, Aston Martin now offer wool and other natural fibres within their interior options on the DBX, and soon to be available for the Valhalla too.
While the market might have cooled for the time being, there is still plenty of innovation in the sector matched by interest from true enthusiasts who will stop at nothing to buy their next collector’s item. The market is anticipated to rebound with the end of lockdown and the return of events such as Goodwood’s Festival of Speed. So, here’s to watching supercars on the famous Hillclimb in the not-too-distant future and a reminder that a purist ‘wouldn’t put bumper stickers on a Bentley’.