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Super-charged collectible cars

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Super-charged collectible cars

Jul 11, 2023

For many, the purchase of a luxury car is the convergence of investment decisions and child-like nostalgia. With future car regulation coming down the line and new EV (Electric Vehicle) speed records being set, how is the supercar market shaping up? We speak to investment experts and luxury automotive manufacturer, McLaren Automotive.

In many corners of the UK, beautiful cars are taking to the streets in increasing numbers. From Jaguar E-Types to the Ferrari 812 Superfast UK, supercar ownership has expanded by 20 per cent in recent years1.

A car collection can become a project, a passion, and an asset for the future. But for those looking to purchase a luxury car for the first time, what are some key trends shaping the industry today? In our era of electrification and climate change, is supercar spending wise? And is there any place for petrol in the future? 

Smart investment or a dream come true?

Whether it’s art or handbags, wine or NFTs (non-fungible tokens), investors will always be drawn to valuable collectibles – and high-end cars are no exception. 

Rare classic cars – those over 25 years old – are deemed to have the potential to become high-value, appreciative collectibles, whereas modern supercars are sometimes viewed as riskier investments. 

However, value for rare hypercars (the 1 per cent of luxury cars which sit at the absolute top end of price and performance, and bottom end of production numbers2), has skyrocketed.3

“Not all modern supercars will offer an instant return on investment, but this can be mitigated by looking for limited edition models,” says George Farquhar, Global VIP Relations Manager, of McLaren’s Private Office. 

“Viewed as a long-term prospect, if you choose wisely, then residual values of modern supercars are strong when projected over 10+ years. Many industry observers suggest we are approaching the end of an era and the peak of the pure combustion-engined breed; now is the time to buy!” 

For those looking to kickstart a valuable car collection, features to look for include rarity, beauty and provenance. Cars with a racing history, previous celebrity owners, or those with historical or technological significance are usually most attractive to buyers. 

“The same rules apply to the car market as they do when somebody is looking to buy a Patek Phillipe watch or Birkin handbag. The strength of a brand is first and foremost,” says Farquhar. “Established automotive marques and elite luxury brands like McLaren, Ferrari, Bugatti and Rolls-Royce are seen as dependable based on their illustrious history, the strength of their engineering, and the size of their customer base.

“Exclusivity is also key. When we create a limited-edition model, we are very deliberate with production numbers so that demand always far outstrips supply. These cars often end up being good investments because they are hard to attain.

“Provenance is also an important factor, especially when looking to purchase race cars. For example, if the car was driven by a famous driver to a World Championship or won a prestigious race, then the car’s value will be significantly higher… even if it was made by the same brand in the same year.”

Despite the potential for appreciation, there’s often more to supercar spending than investment decisions alone. 

“I don’t think any of our clients are investing in cars purely as an asset class – as a cold, calculated investment,” says Nick Brandram, Director, HSBC Global Private Banking. “There is usually some kind of passion for cars.”

Edward Cave, Relationship Manager, HSBC Global Private Banking agrees: “I think there’s a general feeling for lots of our clients that cars are a way to reminisce about the things we loved in childhood. There is more to it.”

A couple of years ago, we noticed a quiet trend amongst clients buying a particular Ferrari – the Ferrari 812 Superfast which is Ferrari’s last naturally aspirated V12… I think they wanted to get their hands on what they believed to be an appreciating classic – something that would be valuable and have meaning in the future. - Edward Cave, Relationship Manager, HSBC Global Private Banking

The big EV transition

For fans of powerful cars, there is a question on the impact of the 2030 UK and EU legislation, which bans the production of new petrol and diesel vehicles (followed by a ban on hybrid production by 2035). Fans of speed need not be troubled by the transition to electric in itself – an EV set the speed record at the Goodwood Festival of Speed last year, clocking a time of 39.08 seconds. 

Pre-loved petrol, diesel and hybrid cars will still be legal to purchase, but as climate threats continue to grow, there is undoubted pressure on the industry to move away from fossil fuels.

“A couple of years ago, we noticed a quiet trend amongst clients buying a particular Ferrari – the Ferrari 812 Superfast which is Ferrari’s last naturally aspirated V12. There was a general acknowledgement that the era of pure petrol was coming to an end and that the industry was transitioning to become hybrid and electric,” explains Cave. “I think they wanted to get their hands on what they believed to be an appreciating classic – something that would be valuable and have meaning in the future.”

But for Original Equipment Manufacturers (OEMs), the race to electrify engines is on. The McLaren Artura is McLaren Automotive’s latest offering: a high-performance hybrid supercar with a top speed of 205 mph. The Lotus Evija is Britain’s first EV contribution, an all-electric hypercar, with a top speed of 218mph. 

“The automotive industry is already well down the electrification path,” explains Farquhar. “This will continue to be the case, but it doesn’t have to determine the character of the cars. Ultimately, the regulations are a framework, with each car maker able to pursue their chosen goals within balancing the delivery of ‘traditional’ driving thrills and meeting legislation. 

“The McLaren Artura is a prime example of this and gives customers the choice of driving a high-performance hybrid, in many cases alongside a V8-engined supercar. And in the not-too-distant future, they will be able to add an electric-powered McLaren to their collection.”

Retrofitting is all the rage

Retrofitting classic cars with electric engines is also steadily growing in popularity. The process can be costly and complex, but the benefits are appealing. For rare classic cars which will retain or appreciate in value, retrofitting could prove a solid investment and eco-friendly decision. 

Trendsetters in the space include David Beckham, who recently invested in luxury electric car convertor, Lunaz Group,4 and gave his son a retrofitted electric 1954 Jaguar XK1405 as a wedding gift. Robert Downey Jr even hosts a series, Downey’s Dream Cars, on retrofitting classic cars to enable them to run on lower-emission technology.6

The industry is still dominated by start-ups however, as many traditional OEMs lag behind specialist conversion businesses when it comes to retrofitting services. This is perhaps due to the challenging economics associated with upcycling petrol cars.7

The automotive industry is already well down the electrification path. Ultimately, the regulations are a framework, with each car maker able to pursue their chosen goals within balancing the delivery of ‘traditional’ driving thrills and meeting legislation. - George Farquhar, Global VIP Relations Manager, of McLaren’s Private Office.

Risk management for your purchase

Luxury car collections aren’t without the need for significant investment.

“Classic cars can appreciate in value, but I’m sure fellow owners will attest that you often spend more on them than you get back,” says Cave. “Like any good investment, keep an eye on the ongoing management fees! In the hypercar territory there is an investment opportunity, but you really have to be part of the club, with a track record of ownership before you can get your hands on that Ferrari.”

Common costs worth considering include general maintenance costs, alongside security, storage, and insurance. For buyers in the classic car market, gathering the correct documentation to prove provenance can be time consuming. And like any asset, knowing when to sell can be tricky. 

“Buying a car is not a sure-fire bet,” adds Nicholas Dudley-Hammatt, Senior Relationship Manager, HSBC Global Private Banking. “There are some that are hard to get a hold of, or suddenly become popular, or a manufacturer stops making them. But the ability to predict that and get the timing right can be similar to the stock market. It’s a really hard thing to get bang on and so tends to reward longer term investors.”

“If purchasing / investing from new, then investors should also consider which options to specify – and those to avoid – when considering future resale values,” says Farquhar. “This can apply to body colour and interior materials, but also personalisation – not everybody shares the same view on extreme finishes. 

“Enthusiasts should follow the same rules but if they are buying new and are less focused on immediate return, they will have greater freedom to choose their ideal car. If they are buying used, visiting a retailer to discuss the market and vehicle availability is a wise course of action.”

A place for petrol?

Is there a place for petrol in a net-zero world? Some supercar and classic car aficionados would certainly hope so, arguing that ownership is not as environmentally damaging in the long-term. 

“I think classic cars can be really sustainable to own and run. You’ve got yourself an engine, a chassis, and a body that’s been around for 40 or 50 years. That is a very different kind of car ownership than buying the latest Range Rover every three years,” suggests Cave. 

“Every company wants you to upgrade to the newest and the best. But actually, a lot of our clients are comfortable buying combustion engine cars because they’re doing so few miles in them. They’re not buying fuel-guzzling cars and driving them tens of thousands of miles,” says Dudley-Hammatt. 

“I think the world is acknowledging that it's not a one-size-fits-all of electrification, and hopefully that gives us some positivity that these beautiful cars that were built over the last 100 years are going to survive.”

For so many, supercars are viewed as both pieces of art, and awe-inspiring technological feats. And the steady evolution of EVs, as well as increasing capabilities to retrofit without sacrificing on purpose and design, gives hope for a cleaner (and stylish) future. 

1 ‘Meet the supercar spotters’, HTSI, Financial Times, 2023. 

2 ‘What is A Hypercar? Let Us Explain’, Howards Motor Group, 2019. 

3 ‘Hypercar Market Goes Hyperactive’, Forbes, 2021. 

4 ‘With Electric Car Investment, David Beckham Did It for the Trucks’, Bloomberg, 2021. 

5 ‘David Beckham promotes retrofit with electric Jaguar XkH140’, Gearrice, 2022. 

6 ‘Downey Jr. targets EV sceptics in new series’, TechCrunch, 2023. 

7 ‘Retrofitting Gas Cars Into EV is both easy, and really hard’, George Downes, Wall Street Journal, 2023. 

This material is issued by HSBC UK Bank plc which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the UK. It has been issued for your information purposes only.

Please note that HSBC does not provide tax or legal advice and clients should seek professional advice from their tax advisor. Any reference to tax is based on our knowledge of the current and proposed tax regime and is subject to change.

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