What Ed Sheeran Can Tell Us About the Market for Classic Cars

What Ed Sheeran Can Tell Us About the Market for Classic Cars

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“Ideally, investors want a supercar with zero hours on the clock,” Mr. Hatlapa added. “It’s a car, and you can’t drive it.”

But some supercars are more equal than others. A 2004 Ferrari Enzo proved the most successful of the 71 lots at RM Sotheby’s, selling for 1.8 million pounds with fees, or about $2.3 million, to a telephone bidder, against a low estimate of £1.6 million.

A 2004 Ferrari Enzo sold for 1.8 million pounds with fees, or about $2.3 million, at an RM Sotheby’s auction in London this week.

Credit
RM Sotheby’s

One of just 400 made since the model’s debut in 2002 (it was then priced at about $660,000), this particular example of the 218 miles per hour “hypercar” had three owners and had previously been auctioned by RM Sotheby’s in 2008, for $1.3 million. Mr. Hatlapa attributed the price appreciation to the unique prestige of the Ferrari brand and the model’s relative rarity.

The rest of the auction generated few other significant prices. Forty-seven percent of the 71 cars didn’t sell, compared with a failure rate of 24 percent from 86 lots at the equivalent RM Sotheby’s auction in London last year.

“I don’t buy new cars,” said Kristian Aadnevik, a Norwegian fashion designer, who lives in London. “They all look the same. That Ferrari Enzo is ugly.”

Mr. Aadnevik, 39, has a collection of eight cars, none of which dates from later than 1971. He is currently restoring a 1961 Jensen 541S coupe. “For me, it’s for fun,” he said. “I don’t do it as an investment.”

That said, since 2005, classic cars have generated the highest returns among so-called passion investments, with prices rising an average of 332 percent, more than two times the equivalent increases for watches, wine and jewelry, according to a Coutts index published this week. In 2016, however, the index for cars fell 10.4 percent, Coutts said.

The current climate of uncertainty has made owners reluctant to test the market with their most valuable ’50s and ’60s classics, reining in auction totals, according to analysts including Mr. Hatlapa. A notable exception last month was a 1956 Aston Martin DBR1 with a distinguished race history that sold for $22.55 million — an auction high for a British auto — at RM Sotheby’s annual bellwether series of classic car sales in Monterey, Calif.

“The market is relatively stable, though some sectors are coming down,” said Brian Rabold, vice president of valuation services at Hagerty, a Michigan-based company that insures collector-grade cars. “Since September 2016, our data has shown that Generation X and millennials have been more actively buying in the market than baby boomers,” Mr. Rabold said.

The recent RM Sotheby’s sale in London included 12 variants of the classic Porsche 911.

Credit
Jack Passey

Younger buyers, unlike older collectors, are more “omnivorous,” he noted, willing to buy cars from the 1960s as well as the ’80s, though at lower prices. “They’re looking for cars they can have fun with driving with friends down a canyon at 8 o’clock on a Saturday morning,” he added.

So for the moment, at least, the market for collectible cars has stabilized into one dominated by more modern Porsches and Ferraris priced in the hundreds of thousands, rather than the millions. The recent sale in Battersea included no fewer than 12 variants of the classic Porsche 911, with a highly original green 1970 911 E among the few successes, selling to a telephone buyer for £126,500, well above the £90,000 upper estimate.

None of this is particularly good news for Sotheby’s, an international auction house looking to increase its share price through growth. Sotheby’s acquired a 25 percent share of RM Auctions in February 2015, reflecting the New York Stock Exchange-listed company’s desire to diversify its sources of revenue.

But growth in the classic car market has stalled, as it has in other luxury markets. Total sales at Sotheby’s in the first six months of 2017 were $2.8 billion, up slightly from the $2.7 billion achieved in the jittery first half of 2016, according to Lauren Gioia, who leads the company’s communications worldwide.

“We’re trying to diversify in a number of different ways into businesses that are less cyclical and volatile than big-ticket art auctions,” said Michael Goss, chief financial officer of Sotheby’s. Mr. Goss highlighted wine and jewelry as possible areas of growth, while emphasizing the importance of lower-value online-only sales, where 45 percent of buyers have been new to Sotheby’s. The company, which is playing catch-up with its rival Christie’s in the digital arena, is scheduled to hold more than 30 online-only auctions this year.

But in the longer term, an equally significant development at Sotheby’s might be its partnership, announced in November, with the San Francisco-based ifonly.com, which calls itself an experience marketplace. On Aug. 18, a two-and-a-half hour sail with the America’s Cup champion Brad Webb sold for $9,375 at the RM Sotheby’s classic car auction in Monterey.

“The consumer is shifting at all price points towards experiences, and this is true in the luxury markets,” said David Schick, senior analyst at Consumer Edge Research in Stamford, Conn.

As the singer Mr. Sheeran and the fashion designer Mr. Aadnevik demonstrated, experience, rather than possession, is a key driver for a new generation of consumers. Owning a luxury car with a top speed of more than 180 m.p.h. is no longer quite enough.

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