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Thread: Supercar Market Update Q2 2020

  1. #1
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    Default Supercar Market Update Q2 2020

    Just posted a new karenable.com article on the Supercar Market:

    https://karenable.com/supercar-market-update-q2-2020/

    Comments? Thoughts?

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    Modificato is offline Looks like a 308 to me? -The Ferrari 288 GTO Club Member
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    Very interesting read and thought provoking as usual.

    I have been advancing the generational taste hypothesis for many years now and I would go even further.
    There is zero evidence that buying into childhood memories will still be a similar scale thing for the coming generations who have been immersed in far more rapid technology cycles than that of their parents. There is zero romance for old tech. Try showing a kid an old mobile phone and see exactly how long it holds their attention!

    Combine this with a propensity to own nothing and value meaningful experiences over asset ownership and you have a recipe for a profound shift in the market.

    My business interests include new economy things which are primarily internet based alternatives to traditional businesses. COVID has been the best business growth accelerant we have ever had in three decades of online trading. This growth represents in the most part people swapping over to something they will now stick with because the online version delivers the same or similar value with far less investment in personal time and money.

    Like the best of technology it frees up more time for leisure compounded with more disposable income.

    So for Supercars and HyperCars which is ironically one of the traditional ‘bricks and mortar’ businesses I am invested in where does that leave us?

    Well the good news is that when messers Nakao & Iwata were brought into Porsche in the early 90’s by Wendel Wiedeking the whole sector woke up to the benefits of Just-In-Time (JIT) manufacturing and customers felt its immediate effects in quality. After years of losses shareholders finally started to get a profitable car company.
    So much so that Porsche is now the worlds most profitable car maker by margin per vehicle. The JIT Revolution has spread across the automotive industry more than any other so in times of extraordinary events keen adherents to its discipline fare way better than their peers. No one owns or pays for any on the inventory until it lands on their factory floor and the best get paid for the product before it leaves the factory! Across the industry everyone works this way now except the highly publicised Dyson / Tesla style contrarians and small niche producers who don not believe the approach is transportable which is ironic given its roots. Loyal customers indulge the variable quality and higher costs. Ferrari was an early convert to the JIT approach and is reaping the long term benefits as a result.

    The company is able to bankroll its own financial packages which is strategically brilliant as the market has gone over to a majority lease based ‘ownership’ approach. Of the brands mentioned in your piece and with inside knowledge I could PM an exact list of who is most at risk but you can probably guess for yourself. I will single McLaren out for special mention because many of its key positions were initially filled by people moving on because they were tired of the hard work and rigour demanded by the now industry standard Toyota approach. I met many of the key hires when it was being set up and many expressed anticipation of working at a company where the pace would be lower and the idea that it would somehow be more artisanal and craft-like.

    Implemented properly the JIT approach means minimal working capital and sunk costs in comparison to both the craft based approach and mass productions ‘make-to-stock’ models. The more this deliberately fragile system stops the more problems can be solved so it creates higher performance for lower investment BUT only if you hold your nerve and stick with it forever. The minute you think you are done learning is when it bites hard or atrophy sets in.

    The inertia of pre-COVID production rates and the relative discipline of only making what has been sold combined with the platform age with its longer amortised sunk costs will all have a direct bearing on who and how well the sector survives and returns. Capital investment is a factor too on this of course. I have been critical of Ferrari’s lack of investment and design choices around composites but they of course now look smart having encouraged suppliers like us to invest for carbon component production. We are doing the same with 3D printing.

    I firmly believe that the 70 year old Ralph Lauren’s and Jay Leno’s of the world will not find a massive queue of buyers for the ownership of their assets but they may find leasing and experience based companies taking the place of private ownership of such collections. Perhaps they will become static museums. Being able to experience such collections at variety of levels of engagement including tours and organised events is what I predict will be those cars futures. Imagine and investment vehicle built around such a collection with access to use.

    Going forward what private cars will be built will be highly bespoke, perhaps up-cycled ‘vintage’, but configured by customers looking for a unique experience not so much a static asset. Global growth will mean that some of the designs will be far from European tastes but if Ferrari have to sell a 20,000 butt ugly SUV’s somewhere else in order to bring us a V12 with KERS so be it.

    As a 50 something owner of a small collection of mildly interesting cars I realise I am sitting on assets that unless my kids want them - one currently not that interested / on a maybe - they will likely be sold and at a loss when compared to purchase and maintenance costs.

    As an industry insider the most resilient part of our business throughout COVID has been the highly bespoke super high quality small volume Option item production that we do for OEM’s like Rolls Royce, Bentley and others.

    With Geneva cancelled for 2021 our prototyping and show car business is having to be adjusted to suit. We are building alongside our design studios private viewing and reveal locations where customers can come for a much more intimate experience with their OEM (s) of choice.

    Times they are a changing.

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    A348W is offline Rear lights like a farm gate - The Ferrari 348 Club Member
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    "Combine this with a propensity to own nothing and value meaningful experiences over asset ownership and you have a recipe for a profound shift in the market"

    As you say there is a fundamental shift in how we pay for the use of our cars. I was amazed at what JLR just came out with...

    "Users of the new service pay a monthly fee for the vehicle’s rental, which covers the cost of insurance, tax, servicing and any repairs needed. The scheme also allows subscribers to change their car every six months - much more frequently than most car leasing schemes - to “suit their changing lifestyle, whether it’s a new job, growing a family or the need for greater flexibility”.

    Whilst I can see the desire of this, I'm not sure about the merits of a shift to a never/ never mentality; but that's just me and I'm sure it will only be a matter of time until this ownership model filters further up the market.

    Interesting point about the collections owned by 70 year olds. Maybe this gives us in our 50s a shot at owning something truly interesting. Whether future generations will have the interest...I guess time will only tell but like you I wouldn't bet the pension on it!!!

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    Quote Originally Posted by A348W View Post
    Interesting point about the collections owned by 70 year olds. Maybe this gives us in our 50s a shot at owning something truly interesting. Whether future generations will have the interest...I guess time will only tell but like you I wouldn't bet the pension on it!!!
    My guess is the shift from the 70 years olds to the 50 year olds will be an evolution on taste. When the next shift comes to those currently in their 20's & 30's is when we will see a complete shift in the market.

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    Quote Originally Posted by Boxer View Post
    My guess is the shift from the 70 years olds to the 50 year olds will be an evolution on taste. When the next shift comes to those currently in their 20's & 30's is when we will see a complete shift in the market.
    +1

    I don't think the tastes of guys currently in their teens and 20s is all that relevant to the older Ferrari market for current owners - at the end of the day what's the average age people buy these cars? It certainly isn't in their 20s although there will obviously be a few exceptions. I've had 2 offers for my car in the last year and she's not even for sale (both times showing guys wanting to buy a first Ferrari around the car) and both times it was guys very similar to my age or only slightly younger. Give it 15-20 years and the preferences of today's youth will have more of an influence on the market.

    I'd also add that trying to predict future tastes is hugely difficult, in fact it's nigh on impossible. I'm not sure anyone predicted 'retro' would become cool with a certain group of youngsters, and it is, so why don't we let them decide what direction they want to take. I pretty much guarantee that if we tell them they'll only go after 'high tech' they'll do the complete opposite.

    Got to say, done a few proms etc in my low tech, old Ferrari - way more attention from the youngsters there than any of the modern much more high tech cars that pitched up.

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    Modificato is offline Looks like a 308 to me? -The Ferrari 288 GTO Club Member
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    Quote Originally Posted by Nosevi View Post
    +1

    I don't think the tastes of guys currently in their teens and 20s is all that relevant to the older Ferrari market for current owners - at the end of the day what's the average age people buy these cars? It certainly isn't in their 20s although there will obviously be a few exceptions. I've had 2 offers for my car in the last year and she's not even for sale (both times showing guys wanting to buy a first Ferrari around the car) and both times it was guys very similar to my age or only slightly younger. Give it 15-20 years and the preferences of today's youth will have more of an influence on the market.

    I'd also add that trying to predict future tastes is hugely difficult, in fact it's nigh on impossible. I'm not sure anyone predicted 'retro' would become cool with a certain group of youngsters, and it is, so why don't we let them decide what direction they want to take. I pretty much guarantee that if we tell them they'll only go after 'high tech' they'll do the complete opposite.

    Got to say, done a few proms etc in my low tech, old Ferrari - way more attention from the youngsters there than any of the modern much more high tech cars that pitched up.
    Interesting take.

    Who is buying the current V8s ?

    Anyone got any average age / customer profile data. Has certainly shifted to non-ownership model.

    Current hipster / Upcycling / future-retro was easy to predict given the trends seen when that generation was at school and college.

    Cars in development right now are being designed by talent coming straight out of university. Our design studios average age is 20 something.

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    Quote Originally Posted by Modificato View Post

    Cars in development right now are being designed by talent coming straight out of university. Our design studios average age is 20 something.
    Must have some youngsters in there then to average out some of the rest of you

    What I'm saying is there are customers in their 40s now who will still be relevant to the market in 15 years - it's not unusual for people to save up and buy their first Ferrari in their 50s. Sure, you get much younger owners but I'll bet owners in their 20s are the exception rather than the norm. You seem almost entirely focused on the younger generation. Perhaps that's your 'niche' but it's not the only market out there. Granted it's the market of tomorrow though

    I'm sure there are some very good automotive design houses out there populated almost exclusively by youngsters but just clicking on the first that came to mind, one that's had a smidge of success both historically and more recently, it's hardly packed full with guys straight out of Uni, at least not those running the place.

    https://pininfarina.it/en/the-team/

    What's your design house called, Mod? You mention it quite a bit so curious to take a look. I could probably find it if I dig enough but quicker just to ask

    Edit: It's ok, found it. Interesting setup you guys have
    Last edited by Nosevi; 08-07-2020 at 10:58 AM.

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    Modificato is offline Looks like a 308 to me? -The Ferrari 288 GTO Club Member
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    We are friends with the guys at Pininfarina, Zagato, Touring Superleggera, Bertone etc.

    We are in the same business.

    Our model is very much that of a studio host and silent development partner. Our hands have been on many of the current crop of HyperCars and Supercars to varying degrees.

    As you probably know my background is Military aircraft design, advanced engineering and experimental projects.

    In my career as a consulting designer / engineer a constant gripe I would hear is how often design teams are undervalued, misunderstood and mis-managed within large companies. Myself and some friends decided to create what we would want as a model for team based design and when the company came up for sale it was ideal to buy a going concern.

    The strategic challenge for the ‘old dames’ of European vehicle design is that have all been progressively dropped by the large OEM’s in favour of in-house designs often led by whomever is ‘au current’ and hot. This has been driven in part to drive youth back into designs and freshen up the brands design language. Think about some of the most iconic designs and how many of them came from the exuberance of youth. Of course any team is a blend and creativity can come at any age (see Vivienne Westwood and the recently departed Karl Lagerfeld).

    These names are relevant because the high end auto industry is configuring more towards the high fashion model and some of the ‘old labels’ are struggling to find a future role.

    All of this has coincided with family firms getting to the point where the old commander has reached the end of career and / or the family don’t want to take it on. Of course these old dames have youth and new blood in them but the ‘house style’ influence and shadow casts very long on these new talents.

    We do of course have a mix of ages and we blend the 3D and additive manufacture with traditional coach building skills. ItÂ’s an amazing array of talent and as the owners are all ex-apprentices we have the old guys and girls teaching a new generation the old skills and vice versa. Design-wise our young team is often partnered with the OEMÂ’s formal team precisely to inject new thinking and itÂ’s an area where none of us as owners inject any personal taste. The Automotive sector is notorious for throwing up newly minted CEOÂ’s who think all of sudden they have some creative flair. I can tell you a great story of a German bureaucrat who got a job at a group luxury brand and immediately ruined a forthcoming design because he couldnÂ’t help himself projecting his banal tastes into the new platform :-)

    Times are definitely seeing profound change as the basic platform and ownership model is undergoing major shifts.

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    Interesting business to be in right now, I can see why you 'bought in' when the opportunity presented itself.

    Looking round your setup I'm guessing the fact you are far more agile than the major manufacturers themselves is why they find it useful to use outfits like yourselves? It's almost as if you have the R&D setup of the big firms only in miniature (in terms of size if not ideas/research) and so I'm thinking it must be easier to move with the times than it would be if you needed to move a large department in a major manufacturer forward in a different direction. Their size can be used as your advantage so to speak - not so different in military doctrine

    Question for you though - is this new ownership model a good thing? I'm a bluff old traditionalist (even if I'm not as old as you but more of a traditionalist, probably why we are so often debating things from other sides of the fence neither of us ever sits on) and I tend to go for the save up for something you want then buy it model. Constantly living beyond your means, or at least living at the edge of them in the firm belief that circumstances won't change, I see as both a little naďve and a bit stupid. I've seen it bite, which is obviously not really an issue for a young single guy or girl but when others are depending on you for their financial security it's a different story. You once spoke of the feeling you get when you are totally debt and mortgage free (not there yet but not all that far to go). Is the way we constantly push the rent everything, own nothing model really responsible? I know the generation following us are adults and can make their own choices but the norm of taking on ever higher levels of debt in order to have (yet not own) the latest sportscar (for example) worries me. Is it sustainable economically do you think?

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    sssdu01 is offline No I'm Spartacus Committee Member
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    Jane and I have 4 kids between us, and they all followed the have it now/rent/lease/#take the easy option model of living. They all had a bigger TV more gadgets etc changing cars all the time with the latest deal, and were perfect examples of the youngsters behaviour Mod often talks about.

    We have been mortgage and debt free for years, but still have the smallest TV, dont rent or lease anything, and only buy stuff we have the cash for. Guess what all of our 4 kids now realise that the have it now/rent/lease model might be good on the day, but they now look to the future and have all realised that its not a sustainable way of living, as one day they will want to retire. All of them have now got mortgages, stopped buying the latest "stuff" , and they have admitted they have turned into mum and dad when it comes to finances !!

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