Invest in a Supercar: Asset Tokenization Explained

They say that it “takes money to make money” and this is particularly true when it comes to investing in cars. While an average new vehicle loses 30% of its value in the first 12 months and continues to depreciate for years, limited edition supercars like the La Ferrari tend to go up in value almost immediately after they are sold. Writing for Top Gear, RM Sotheby’s Max Girardo argues that “almost any limited edition hypercar” is a good investment.

Up until recently, however, the only people who could profit from this appreciation were wealthy elites who had the bank balance and connections required to pay big money upfront. However, now a new investment technology has emerged that will make it possible for everyone to invest in these cars. This technology, which is likely to shake up the supercar market, is called asset tokenization.

WHAT IS A CRYPTOCURRENCY?

In order to understand asset tokenization, you first need to have a basic understanding of what a cryptocurrency is. A cryptocurrency, like Bitcoin for example, is a digital currency that uses encryption technologies to regulate the supply of the currency and transfer of funds. The value of a cryptocurrency is solely based on what other investors in the marketplace perceive it to be worth, however, and the lack of any tangible underlying asset can lead to volatility. Whereas one Bitcoin traded at around $120 in 2013, for example, during the boom in December 2017 it was trading for $19,000, but it is now worth around $3,300.   

WHAT IS ASSET TOKENIZATION?

Asset tokenization refers to a process whereby a new type of crypto asset is created which is directly backed by a physical asset such as a car. So imagine a limited edition supercar that currently costs around $800,000. Needless to say, most people could not afford this purchase price. If 10,000 investors combined their resources and each invested $80, however, the car could be purchased.

WHAT IS A “SECURITY TOKEN”?

In the case above, each investor would then receive a “security token”, which would be directly backed by the value of the car. If the car increased in value by a given amount, say 20%, the car would be resold and the investors would receive the initial cost of their token and an additional profit proportional to the increased value of the vehicle. This investment mechanism means that the highly exclusive and historically lucrative supercar market is now open to everyone.   

WHAT ARE THE BENEFITS OF ASSET TOKENIZATION?

The main benefits of asset tokenization are as follows:

  1. Liquidity/Divisibility: Tokenization enables you to invest in an expensive asset like a supercar, without needing to buy the whole car (and pay the whole purchase price). While this was not impossible before, investors typically had to pay a so-called “illiquidity discount” of up to 20-30%. By using tokenization, these costs can be avoided.
  2. Diversification: Tokenization enables you to diversify your risk by buying tokens in multiple cars. This means that if one car does not perform well, the loss could be offset by profits on other cars.  
  3. Lower Cost: As there are very few middlemen involved, fees are relatively low.
  4. Compared to a conventional investment, there is very little bureaucracy. Everything can be controlled and monitored online.  
  5. Faster Settlements: The higher liquidity and automated nature of the system mean that transactions are much quicker.
Asset Tokenization: You can invest in a Ferrari F12tdf for as little as $100
Asset Tokenization: You can invest in a Ferrari F12tdf for as little as $100

Find out why the Ferrari F12tdf doubled in value in eight months here. If you would like to learn more about investing in supercars on Curio, click here.

The 5 Most Bizarre Street-Legal Supercars of All Time

Wealthy backers with crazy dreams have produced some really weird supercars over the years. If you have a few hundred thousand dollars burning a hole in your pocket and very eccentric tastes, one of these 5 vehicles might just be for you.

The Panther 6. Image: 19Bozzy92 via YouTube

THE PANTHER 6

Panther Westwinds was a UK manufacturer of expensive niche cars in the 70s and 80s. A lot of their cars were pretty weird but the Panther 6, which debuted in 1977, is particularly bizarre. Aesthetically, it looks like the love child of a hot tub and a truck, but it was actually a very fast car in its day. The monstrous 8.2-liter twin-turbo V8 engine produced 600 bhp and a top speed of 320 kmph, which was unheard of at the time.    

So why does it have 6 wheels? It was inspired by the Tyrrell P34 Formula 1 car, which introduced 4 small, 10-inch front wheels that could fit below the vehicle’s front wing to minimize aerodynamic drag while retaining the same surface area of rubber on the road. This made sense in Formula 1, because there was a rule at the time which restricted the size of the front wing to 1.5 meters. It made less sense for a production road car, which explains why there haven’t been many 6-wheeled supercars since, despite Italian manufacturer Covini’s efforts to resurrect the idea. Only two Panther 6 vehicles were ever built, one of which was exhibited at the 2015 Concorso d’Eleganza Villa d’Este.  


The Caparo T1 has twice as much horsepower per kilogram as a Bugatti Veyron. Image: By Mike Roberts – Flickr, CC BY-SA 2.0

CAPARO T1

First, let’s address the elephant in the room – the Caparo T1 looks like how an 8-year old would draw a Formula 1 car before they learned about perspective. However, the vehicle does have the performance to match the aesthetic.

Designed by the team behind the McLaren F1, the T1 aims to incorporate the design principles of Formula 1 into a production road car. It has a 3.5-liter V8 engine which produces 575 hp, while the lightweight carbon fiber body means that the entire car only weighs 470 kg. For comparison, a modern VW Golf weighs about 1,351 kg. This means that the Caparo T1 has an outrageous power-to-weight ratio, delivering twice as much horsepower per kilogram as a Bugatti Veyron, enabling it to reach a top speed of 330 kmph.

The Caparo T1 had a recommended retail price of around $300,000 when it was released in 2007 and as of 2012, 16 had been sold in the UK.

Even without the weird paint job, this car looked odd. The Mosler Consulier GTP.

MOSLER CONSULIER GTP

If it is true that “style never goes out of fashion”, what the hell was going on in the 1980s? Released in 1985 when Careless Whisper by Wham was top of the charts, the US-made Consulier GTP looks as if it has the front-end of a snow plough and the windscreen of a Lada. Following similar design principles to British manufacturers like Lotus (but not the aesthetics), the car’s designer Warren Mosler paired a modest 2.2-liter Chrysler engine with a lightweight fiberglass body. The car had an excellent power-to-weight ratio as a result, which made it very competitive in International Motor Sports Association races. Only 83 examples of the original design were produced and it was originally priced at $60,000, which equates to about $138,000 in today’s money after adjusting for inflation.

Be careful not to cut yourself: the Aston Martin Lagonda

ASTON MARTIN LAGONDA

The dashboard of the the Aston Martin Lagonda. Image: via Youtube, The Fast Lane Car

On the outside, the 1976 Aston Martin Lagonda was an extreme interpretation of the “folded-paper aesthetic” favored by British designer William Towns. The 5.3-liter V8 engine was unbelievably thirsty, burning an average of 35 liters of fuel for every 100 km traveled (8 mpg). It had a top speed of 240 kmph and could accelerate from 0-100 km in 6.2 seconds.

However, it is the interior that really makes the Lagonda stand out, but not in a good way. Aston Martin was basically trying to create a Tesla interior with technology from 1976, replacing the entire dashboard with a massive and notoriously unreliable system of gas plasma monitors, LED panels and capacitive touch buttons. These complicated electronics were plagued with unreliability issues and were discontinued completely in 1980. When it was released, it was one of the most expensive cars in the world, priced higher than some Rolls Royce models of the same period. In total, 645 Lagondas were sold.

The Mitsuoka Orochi. Image: Kim H Yusuke via commonswiki [GFDL or CC-BY-SA-3.0], via Wikimedia Commons

MITSUOKA OROCHI

Designed by Japanese sports manufacturer Mitsuoka Motors in 2006, the Orochi is supposed to resemble a dragon but looks more like a bottom-feeding fish. This car wouldn’t look out of place in a children’s cartoon and is regularly cited as one of the ugliest supercars of all time. Indeed, if you manage to make scissor doors look bad, you must be doing something wrong.

Beneath the hood, the Orochi has a 3.3-liter V6 Toyota engine producing 233hp, which enables a top speed of about 250 kmph. The Orochi Final Edition had a recommended retail price of $125,000 and production was limited to 400 units.

Should I Invest in Classic Cars or Supercars?

Over the past decade, collectable cars have been a very profitable investment. In 2017, the Knight Frank Luxury Investment Index revealed that while assets like wine, watches and coins offered investors returns of between 3% and 10% over 12 months, cars had produced incredible returns of 28% over the same period. Unsurprisingly, this has led many to view collectable cars as a potentially clever investment rather than merely a wealthy indulgence. This change in attitude was confirmed in 2018, when German banks began advising their clients to consider purchasing classic cars as an investment.

“in any collectable market, scarcity drives value”

The raises an interesting question – if you are buying a vehicle as an investment, is it better to opt for classic cars or modern supercars? Up until very recently, the conventional wisdom among investors was that classic cars make better investments than supercars. The argument is that in any collectable market, scarcity drives value. As there is a finite number of well preserved classic cars in existence, values will continue to increase if demand does not fall.

The Ferrari 250 GTO, regarded as the holy grail in the car collecting community due to its rarity and beauty.
The Ferrari 250 GTO, regarded as the holy grail in the car collecting community due to its rarity and beauty.

Indeed, many of the most expensive vehicles ever sold are classic cars. As ever, Ferrari tends to lead the field in terms of price here: the most expensive car ever sold is believed to be a 1963 Ferrari GTO which cost a staggering $70 million in a private sale. The previous highest price was also for a Ferrari GTO, regarded as the holy grail in the car collecting community due to its rarity and beauty, which was sold for $52 million in 2013.

“the conventional wisdom is beginning to be challenged”

However, recently the conventional wisdom is beginning to be challenged due to two interesting trends. The first trend is that after years of stellar growth, the market for classic cars could be starting to level off. JBR Capital CEO Shalom Benaim contends that although extremely rare classics still command high prices, the average prices in the classic car market may have “plateaued”. This trend is also in evidence at big car shows, such as the Amelia Island Concours d’Elegance in Florida. Overall sales have decreased at the event in recent years from $140m in 2016, to $121.3m in 2017, and $80.5m in 2018.

The LaFerrari now commands a value of around $3m, double the initial asking price.
The LaFerrari now commands a value of around $3m, double the initial asking price.

The second trend is that the values of rare hypercars have skyrocketed recently. The Ferrari F12tdf, for example, had a production run of just 799 vehicles and an initial list price of $450,000. Just 8 months later, a well optioned F12tdf fetched a staggering $1,550,000 in a private sale, representing a growth in value of 200%. Similarly, the LaFerrari, which had a production run of 499 and an initial list price of around $1.5 million, now commands a market price of $3 million. Writing in Top Gear Magazine, Max Girardo of RM Sotheby’s Europe argues that “almost any limited-production hypercar” is a good investment.

Top Gear’s James May puts the LaFerrari through its paces.Of course, all this does not mean that you cannot make money by investing in certain classic cars. Bloomberg’s Hannah Elliot contends that despite softening in the classic car market, “people will pay plenty of money for the “right” thing—not necessarily the biggest or the most-hyped.” However, there are many more factors to consider when investing in classics, such as proof of providence, maintenance and ownership history, all of which are less onerous with newer supercars. Thus, if you can gain access to them, the smart money might be on limited edition supercars right now.