A 1.8 Million Ferrari Wreck - Classic Cars as Alternative Investments
- the haptic investor
- 2. Aug. 2024
- 6 Min. Lesezeit
Aktualisiert: 29. Sept.
Why a complete wreck of a 4 cylinder Ferrari sold for 1.8 Million USD and what that means for the investment class of classic cars.
As some of my older followers might remember, the alternative investment class of rare classic cars was part of the main focus of the early days of The Haptic Investor. Without going into too much detail, I would like to claim that I am well connected in and a part of the scene for rare vehicles and know one or two private vehicle collections. The developments over the last decade have been more than interesting, especially during the zero interest phase, when investors were desperately seeking for alpha generating investments. The following is an excellent example of this very market.
Recently, the auction house RM Sotheby's achieved a successful sale of a 1954 Ferrari 500 Mondial Spider Series I, commanding a substantial price of $1,875,000 USD.
While Ferrari has a longstanding reputation as a luxury brand, typically warranting high prices for well-preserved classic models, this particular Ferrari diverged from the norm due to its dire condition.
Remarkably, the vehicle lacks both wheels and internal components, and its body has endured significant damage from a severe fire incident. The state of the car is reminiscent of a prop one might encounter in a scene from a junkyard in a movie. The question arises: how could a severely compromised Ferrari command am almost two million-dollar price?
The dilapidated Ferrari in question was once owned by Franco Cortese, a former Ferrari factory driver who procured the car around 1954 with the specific intention of using it for racing purposes. The name may sound familiar, as Franco Cortese was the driver who secured Ferrari's inaugural professional racing victory at the 1947 Rome Grand Prix.
During its active period, the Mondial Spider participated in significant races like the Mille Miglia in 1954, where it achieved a fourth-place finish, and the Golden Shell race at the Imola Grand Prix, where it came in eighth.
Over the years, Cortese's Mondial Spider changed hands several times, maintaining a presence at notable racing events such as the Gran Premio Supercortemaggiore and the Evergreen Trophy Race. However, an unspecified crash in the late 1960s resulted in the vehicle's current state, characterized by the extensive fire damage.
Even in its considerably deteriorated form, this Mondial Spider possesses substantial allure as a collectible item, boasting a noteworthy history that appeals to both Ferrari enthusiasts and aficionados of racing history. While the identity of the car's new owner remains undisclosed, if they possess the resources, determination, and audacity required, the Mondial Spider could potentially serve as the centerpiece for an exceptionally ambitious automotive restoration undertaking
More About The Car
During the mid-1950s, Ferrari experienced a rise in popularity for its inline-four-cylinder sports-racers, a less celebrated yet captivating chapter in the brand's history. Enzo Ferrari noticed that other four-cylinder cars were keeping pace with his V-12-powered vehicles during Formula Two competition in 1950, as the four-cylinder engines had a lower peak rpm range, enabling them to achieve their potential faster than the high-revving V-12 Ferraris.
To address challenges posed by winding courses, Ferrari assigned Aurelio Lampredi to create a four-cylinder engine. The 1951 Bari Grand Prix saw the debut of a 2.5-liter unit producing 200 horsepower. This initiative proved prudent as Ferrari's dominance continued in Formula Two during 1952 and 1953 due to the absence of credible challengers.
Lampredi's new 2-liter inline-four-cylinder engine was developed for racing, emphasizing simplicity and reliability. It had fewer moving parts and was 92.8 pounds lighter than the previous V-12 engine. The engine boasted dual sparkplugs powered by twin magnetos and twin-choke Weber carburetors, generating 170 horsepower. Alberto Ascari's consecutive championships in 1952 and 1953 solidified Ferrari's dominance.
Chassis number 0406 MD, the second Mondial built, holds historical significance. It was originally owned by Franco Cornacchia, a Scuderia Guastalla principal and - as already mentioned - by Franco Cortese, it achieved notable finishes in various races, changing ownership multiple times. It was raced in different events and re-bodied by Scaglietti. The car eventually ended up in the United States, experiencing changes, crashes, and the severe fire damage.
The Classic Car Market From My (Inside) Perspective
This development is not an isolated case. I will be addressing this specific market segment in depth in the future, but nevertheless there is roughly only one known direction in the top shelf of classic vehicles: The upward!
We are not talking about mass-produced vehicles, such as a certainly no less beautiful Mercedes W113 Pagoda, Corvette C2 Split Window, a 1969 Alfa Romeo Spider or even a Jaguar E-Type.
We are talking about the Olympus of automotive engineering. Marginal numbers of units, prestige racing successes, history, material combinations.
Therefore we move in the realms of Mercedes Benz 300 SL, Ferrari 250 GTB, Lamborghini Miura, BMW 328, BMW 507 and Bizzarini 5300 GT.
The demand for these pieces of art on four wheels is always higher than the demand in the respective niche segments. In this respect, this market has been an extremely lucrative business in recent years. Nevertheless, there are three things to consider which, in my opinion, are among the greatest risks of this investment class. However, I would like to address these only superficially and save the in-depth look for a separate article.
I. Import Vehicles
Rising prices in domestic markets create incentives for (re-)imports, which can depress the domestic price. The best example of this is American Mercedes-Benz 300 SLs. Many American models are finding their way onto the European market. The resulting oversupply can have a negative impact on price stability in the European market ecosystem. The same applies to selected Porsche models, such as the 356 Speedster and 550 Spyder.
II. Maintenance Costs
In my opinion, this market is absolutely not recommended for newcomers. In particular, many underestimate the maintenance costs in the area of bodywork, paint and engine work. It is true that the technology was fundamentally simpler. However, this does not mean that the maintenance of such a classic is below that of, say, a Porsche 918 Spyder. Nevertheless, original parts no longer exist for many vehicles, so you have to rely on specialized manufacturers with corresponding prices.
III. The succession question
While demand in this highly specific market segment is currently high and (U)HINI numbers are on the rise globally, it is questionable how long the love for such vehicle classes will last.
Nevertheless, the number of people investing such seven-figure sums for such vehicles is decreasing in my environment and my group of age. These decades-old gems are too prone to faults and require too much care. Of course, even a modern supercar or hypercar needs a lot of attention (and a battery charger or two, believe me), but the likelihood that the vehicle will start, won't leave any oil stains, and won't break down on the way out is significantly higher.
The stress factor with classics should not be underestimated. So the leisurely Sunday drive degenerates into a test of nerves. In this respect, the less complexity and headaches alone speak in favor of modern hypercars or supercars. Furthermore, an enormous gain could also be made with these. Just take a look at the price development of Ferrari 458 Speciale, 488 Pista, or the Aventador SVJ Roadster.
At least in my bubble, many investors dream of a Ferrari 488 Pista rather than an Aston Martin DB6. Sad for classic car enthusiasts like me, but reality. In that respect, the question is whether this market segment will appeal at all to the successor generations from the late 1990s and 2000s onward.
In the long term, this is probably the biggest risk of all.
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