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Not in this case, there is an oversupply of millionaires demanding and supporting a way bigger market than ever before.
Except they aren’t supporting a bigger market, or else all inventory would be snapped up, resale values would be holding up better, no?

Seems we may be going round in circles here. I think everybody agrees the absolute number of folks that can afford a 300K car has grown significantly. The manufacturers used that data point precisely to support their volume increases and endless model variants over the last several years. So the current inventory is simply too high.

However, supply IS being rationalized, largely forced by Covid-19. But it would have had to happen, anyway.

I think what is interesting to contemplate is how much of the boom & bust cycle is spent in relative equilibrium, i.e. where production roughly equals demand. Coming out of this downturn (however distant in the future) there WILL be a period where demand is greater than supply. Because wealth will grow faster than production can ramp.

The key for a luxury brand, of course, is to maximize the brand’s equity without selling it out. McLaren’s original business plan ended up being too lofty, so they backed themselves into a corner by building out too much capacity and needing to show investors ROI.

Now with production cuts being literally forced upon them, they do have a second chance to create a plan that is more agile with respect to demand fluctuations and pay more attention to the brand’s long term value. BUT, they need to solve the cash crunch first AND have leadership and investors that understand the importance of a proper strategy. Both far from forgone conclusions at the moment.


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Except they aren’t supporting a bigger market, or else all inventory would be snapped up, resale values would be holding up better, no?

Seems we may be going round in circles here. I think everybody agrees the absolute number of folks that can afford a 300K car has grown significantly. The manufacturers used that data point precisely to support their volume increases and endless model variants over the last several years. So the current inventory is simply too high.

However, supply IS being rationalized, largely forced by Covid-19. But it would have had to happen, anyway.

I think what is interesting to contemplate is how much of the boom & bust cycle is spent in relative equilibrium, i.e. where production roughly equals demand. Coming out of this downturn (however distant in the future) there WILL be a period where demand is greater than supply. Because wealth will grow faster than production can ramp.

The key for a luxury brand, of course, is to maximize the brand’s equity without selling it out. McLaren’s original business plan ended up being too lofty, so they backed themselves into a corner by building out too much capacity and needing to show investors ROI.

Now with production cuts being literally forced upon them, they do have a second chance to create a plan that is more agile with respect to demand fluctuations and pay more attention to the brand’s long term value. BUT, they need to solve the cash crunch first AND have leadership and investors that understand the importance of a proper strategy. Both far from forgone conclusions at the moment.


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All true, but another crucial factor is that McLaren needed sufficient economies of scale in order to produce the cars at a cost that translated into a selling price that the market would accept. This is a problem for all car-makers, but especially those in this niche. Ferrari are able to do it because they spend less on R&D and have been using the same basic technology for ages. Lambo can do it because many of their costs are shared across massive volumes within VAG. Even then, both Ferrari and Lambo have had to resort to SUVs to get their volumes and overall revenue up, just as Porsche did with the Cayenne. This obviously leads to the vicious circle: enough volume to achieve economies of scale reduces exclusivity and makes each unit worth less than it otherwise would be.
 

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All true, but another crucial factor is that McLaren needed sufficient economies of scale in order to produce the cars at a cost that translated into a selling price that the market would accept. This is a problem for all car-makers, but especially those in this niche. Ferrari are able to do it because they spend less on R&D and have been using the same basic technology for ages. Lambo can do it because many of their costs are shared across massive volumes within VAG. Even then, both Ferrari and Lambo have had to resort to SUVs to get their volumes and overall revenue up, just as Porsche did with the Cayenne. This obviously leads to the vicious circle: enough volume to achieve economies of scale reduces exclusivity and makes each unit worth less than it otherwise would be.
I agree it’s a dead zone between sufficient volume and the boutique players like Ksegg and Pagani. Maybe they should have started out with an Aventador/F12 competitor at a higher price.


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All true, but another crucial factor is that McLaren needed sufficient economies of scale in order to produce the cars at a cost that translated into a selling price that the market would accept. This is a problem for all car-makers, but especially those in this niche. Ferrari are able to do it because they spend less on R&D and have been using the same basic technology for ages. Lambo can do it because many of their costs are shared across massive volumes within VAG. Even then, both Ferrari and Lambo have had to resort to SUVs to get their volumes and overall revenue up, just as Porsche did with the Cayenne. This obviously leads to the vicious circle: enough volume to achieve economies of scale reduces exclusivity and makes each unit worth less than it otherwise would be.
Additionally the stats differences between 150-250k sportscars (AMG GTR, GT3rs, 570s) and 300-600k supercars are getting pretty small if not neglectable .... the only really reason is exclusivity and maybe some latest generation super value (like the 720s or Pista have) which becomes usually common 3-5 years later with the lower tier too...
 

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Cheap money contributes to over production. Someone invested money in Mclaren to make so many cars. The new exotic market has been chasing its own tail for years now. Get more investment, make more cars, sell more cars, make more money, get more investment, etc, until the bubble pops like now.
 

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Also, I think buying habits have changed a lot in this market. I used to think of the "it" car. Which dream car will be the one I can "grow old with." Be that retired guy babying his supercar. But somehow, we changed into this chart the depreciation curve group, looking at prices to get into a "deal" and "get the experience" and get out for as little capital outlay as possible. We get into the whole, target a low range, distressed asset, practice arbitrage, and even utilize crazy finance deals because of cheap money just to minimize investment in this 12 - 18 month experience.

Initially, I found this fun, but now it seems like a bit of over indulgence. Maybe modern exotics are not meant to kept for over 10 years like old Ferraris. I have a feeling if I bought a 458 ten years ago as my keep it forever supercar into retirement, I think I would be happy, but I didn't have $280K then LOL.
 

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Also, I think buying habits have changed a lot in this market. I used to think of the "it" car. Which dream car will be the one I can "grow old with." Be that retired guy babying his supercar. But somehow, we changed into this chart the depreciation curve group, looking at prices to get into a "deal" and "get the experience" and get out for as little capital outlay as possible. We get into the whole, target a low range, distressed asset, practice arbitrage, and even utilize crazy finance deals because of cheap money just to minimize investment in this 12 - 18 month experience.

Initially, I found this fun, but now it seems like a bit of over indulgence. Maybe modern exotics are not meant to kept for over 10 years like old Ferraris. I have a feeling if I bought a 458 ten years ago as my keep it forever supercar into retirement, I think I would be happy, but I didn't have $280K then LOL.
strange right ? I think the same sometimes ... these cars used to be dream cars which you would have hold onto for your kids ... now they are come and go after 1-2 years for many ...

This changed so much over the last years ... and it’s really strange Bc I look at my dad loving his 1981 911Sc which has been modified a lot and raced by him in the 1980is ... he still loves that car and drives it every year several times ... don’t know how many here could even imagine driving their current McLaren in 2059 ...
 

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Definitely agree and the digital vs analog is a factor in that. Similar to a vintage analog guitar amp built with tubes, you’d keep that relic around until your wife threw you (and it) out of the house. Now you you can buy digital units that are obsolete after 12 months because the next version is out.

Then again, back then you couldn’t short ETFs and buy credit default swaps either.

Making money can be quite complicated these days. Sometimes keeping it even more so!


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Oversupply isn't necessarily a problem. Depreciation isn't actually a problem for a luxury business. As long as people don't mind pissing away money, it's fine. Depreciation is only a problem if creates deflationary pressures regarding new purchases.

It is possible that the exotic market turns into the general luxury consumer goods market -- the stuff depreciates fast, but people buy it over and over just like they buy design clothes over and over.
 

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Oversupply isn't necessarily a problem. Depreciation isn't actually a problem for a luxury business. As long as people don't mind pissing away money, it's fine. Depreciation is only a problem if creates deflationary pressures regarding new purchases.

It is possible that the exotic market turns into the general luxury consumer goods market -- the stuff depreciates fast, but people buy it over and over just like they buy design clothes over and over.
no that would be the end of the market as we know it ... there are many ppl who can buy or lease 200-300k cars ... but not many who can spend 200-300k every 2-3 years ... most ppl sell their old cars to fund new ones ... if this does no longer work the market implodes to those few ppl who don't care about sums in that region ...
 

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Except they aren’t supporting a bigger market, or else all inventory would be snapped up, resale values would be holding up better, no?

Seems we may be going round in circles here. I think everybody agrees the absolute number of folks that can afford a 300K car has grown significantly. The manufacturers used that data point precisely to support their volume increases and endless model variants over the last several years. So the current inventory is simply too high.

However, supply IS being rationalized, largely forced by Covid-19. But it would have had to happen, anyway.

I think what is interesting to contemplate is how much of the boom & bust cycle is spent in relative equilibrium, i.e. where production roughly equals demand. Coming out of this downturn (however distant in the future) there WILL be a period where demand is greater than supply. Because wealth will grow faster than production can ramp.

The key for a luxury brand, of course, is to maximize the brand’s equity without selling it out. McLaren’s original business plan ended up being too lofty, so they backed themselves into a corner by building out too much capacity and needing to show investors ROI.

Now with production cuts being literally forced upon them, they do have a second chance to create a plan that is more agile with respect to demand fluctuations and pay more attention to the brand’s long term value. BUT, they need to solve the cash crunch first AND have leadership and investors that understand the importance of a proper strategy. Both far from forgone conclusions at the moment.


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But they are. There are WAY more super cars out in peoples hands than there were say 10 years ago. Maybe we've saturated them (I dont think so) but even if now is the point of saturation, the market is way bigger than it was in the 90s.

And yes, that's my point. 300k super car market has grown hugely say since the 90s.

I'm not sure that CoVID is causing any 'come to Jesus' soul searching. It's natural during a pandemic and now civil unrest, supercars are not top of mind in people's purchasing thoughts. Maybe it will cause soul searching, and maybe it's a pause because of circumstances. I'm betting on the latter.

As for boom and bust, interesting video on how one owner thinks McLaren's problems are from oversupply. I disagree with him. McLaren doesn't care about 2ndary markets, they care about their bottom line and they have a model like Aston Martin where they dont care that your car drops like a rock in the 2ndary market. But he may be right, maybe that ultimately is quelling top end demand. Regardless, interesting analysis and much of what we've hashed out here in the forums multiple times:


I think his analysis and yours lines up decently.

TLDR his view is McLaren doesn't balance demand like Ferrari does (although his argument on the 488 is laughable as it's way oversupplied and people are trying to dump it like a bad cold) and if McLaren ran things more like Ferrari things would be "good".

I certainly can appreciate that, and probably agree from a business vantage, but I also wonder why isn't there room for a make that doesn't care about 2ndary markets. Doesn't care about the posers that dont drive their cars but pawn off into a caste system pecking order of 2ndary and tertiary markets.

You buy the car, know it will drop like a rock, so you might as well drive the s**t out of it. I kind of like that mode. If you cant afford it, go over to Ferrari and preserve your car's mileage/virtue so the next guy can enjoy it more...
 

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Also, I think buying habits have changed a lot in this market. I used to think of the "it" car. Which dream car will be the one I can "grow old with." Be that retired guy babying his supercar. But somehow, we changed into this chart the depreciation curve group, looking at prices to get into a "deal" and "get the experience" and get out for as little capital outlay as possible. We get into the whole, target a low range, distressed asset, practice arbitrage, and even utilize crazy finance deals because of cheap money just to minimize investment in this 12 - 18 month experience.

Initially, I found this fun, but now it seems like a bit of over indulgence. Maybe modern exotics are not meant to kept for over 10 years like old Ferraris. I have a feeling if I bought a 458 ten years ago as my keep it forever supercar into retirement, I think I would be happy, but I didn't have $280K then LOL.
I think youre right on the money. If you bought a 458, it's such a pretty car still, and you have no problems with it, how could you not still be enjoying that car? I think it's a great car to grow old with (assuming it's not giving you problems).

Similarly, I just turned down a killer deal on a new 720s coupe. 80k off (and I think I might have pushed it to 100k). So a 380k car for say 280. Maybe I can get 80 for my old 12C. So that means I pay 200k to 'upgrade'. I passed even though it's a great deal and a great car. Beyond my not liking the 720s interior, I just dont care that it's that much faster than the 12C. I never sit in the 12C saying, s**t, if this thing were just that much faster... I smile every time I take it out. I just wouldn't be 200k happier (and in someways would be less happy). So I'm now on year 8 of my 12C. The only thing I "miss" on the 12C is no apple car play, and the 720 doesn't solve that either. Unless/until the car starts giving me problems, I just see no reason to upgrade. My world of upgrade possible cars are the 720, Tesla Roadster, SCG 004. Other than the SCG, I'm not sure the others offer an upgrade experience I really feel is worth the money. The Tesla roadster might be super heavy so not sure about how it will handle. As for the SCG, I've seen race versions of it, and not sure I'm in love with the looks. I need to kick the tires.

TLDR; I've kept this 12C at this point FOREVER, I use it as my daily etc. Love it. I don't feel I'm missing out. I dont have that ache for some reason. If I happen to grow old with it, that's not a bad thing. On the other hand, it would be nice to really get lit up about something that would make me feel the upgrade was worth it. Just not feeling it yet, and in the mean time, I'll keep doting on my old swipe door baby. :D
 

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I think youre right on the money. If you bought a 458, it's such a pretty car still, and you have no problems with it, how could you not still be enjoying that car? I think it's a great car to grow old with (assuming it's not giving you problems).

Similarly, I just turned down a killer deal on a new 720s coupe. 80k off (and I think I might have pushed it to 100k). So a 380k car for say 280. Maybe I can get 80 for my old 12C. So that means I pay 200k to 'upgrade'. I passed even though it's a great deal and a great car. Beyond my not liking the 720s interior, I just dont care that it's that much faster than the 12C. I never sit in the 12C saying, s**t, if this thing were just that much faster... I smile every time I take it out. I just wouldn't be 200k happier (and in someways would be less happy). So I'm now on year 8 of my 12C. The only thing I "miss" on the 12C is no apple car play, and the 720 doesn't solve that either. Unless/until the car starts giving me problems, I just see no reason to upgrade. My world of upgrade possible cars are the 720, Tesla Roadster, SCG 004. Other than the SCG, I'm not sure the others offer an upgrade experience I really feel is worth the money. The Tesla roadster might be super heavy so not sure about how it will handle. As for the SCG, I've seen race versions of it, and not sure I'm in love with the looks. I need to kick the tires.

TLDR; I've kept this 12C at this point FOREVER, I use it as my daily etc. Love it. I don't feel I'm missing out. I dont have that ache for some reason. If I happen to grow old with it, that's not a bad thing. On the other hand, it would be nice to really get lit up about something that would make me feel the upgrade was worth it. Just not feeling it yet, and in the mean time, I'll keep doting on my old swipe door baby. :D
You are dead on, and I envy your satisfaction! I think just being a 911 guy, I might just do a 991.2 GT3RS and call it a day. They are 185K to 200k now and easier to service long term. I was tempted by 675LTs, 600LTs, 720s, 488 GTBs, but feel they would be dated in 3 years and on to the next best and greatest. I enjoyed my 570s for the 18 months or so I had it, but I am more afraid of fixing the 675LT or 720S over 5 year+ ownership on a used car. Otherwise, it's the warranty tax of $4k a year right?
 

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I think his analysis and yours lines up decently.

TLDR his view is McLaren doesn't balance demand like Ferrari does (although his argument on the 488 is laughable as it's way oversupplied and people are trying to dump it like a bad cold) and if McLaren ran things more like Ferrari things would be "good".

I certainly can appreciate that, and probably agree from a business vantage, but I also wonder why isn't there room for a make that doesn't care about 2ndary markets. Doesn't care about the posers that dont drive their cars but pawn off into a caste system pecking order of 2ndary and tertiary markets.

You buy the car, know it will drop like a rock, so you might as well drive the s**t out of it. I kind of like that mode. If you cant afford it, go over to Ferrari and preserve your car's mileage/virtue so the next guy can enjoy it more...
I really like Robert and think he is great guy but his statement does exclude a lot and simply in my option leaves many points one should at least discuss blank:

1. McLaren owners are in 90% plus former Lamborghini/Porsche/Ferrari Owners - they went to McLaren bc they were tired of the games/BS and so on these companies put up so they went to McLaren and wanted to try sth. new. If you don't let these ppl buy into Super Series cars they will not buy any cars from McLaren at all but look else where. These ppl are also often multiple other sportscar owners and expect to at least get the regular production models without hassles ... many ppl of this group if they liked McLaren bought multiple new ones later on, however you would never get any of these customers if you don't sell them what they want but only a low tier car. That is why Ferrari suddenly started selling Pistas to ppl who never owned a single Ferrari ( I know 3 ppl who have a Pista as their first ever Ferrari and 2 that get a SF90 as first ever Ferrari) ... so its actually the opposite Ferrari is now also using this model and went away from their old buy a used one, buy a low tier new , buy multiple normal ones and the maybe get the first special tactics that they used before ... the ppl still in the game are ONLY the ones buying Icona and LaFerrari lvl stuff and maybe some waiting for the last NA V12 Specials ...

2. McLaren as a car company is 8 years old, if they don't aggressively acquire market share (like a start up) they are toast ... or they could maybe become some other version of Pagani/Kegg with only 100 cars output per year ...

3. McLaren's financial problems come from R&D cost and Investment into infrastructure and not from a wrong pricing of their cars (720s is more than a F8 even with discount) ... However while Ferrari uses mostly not as innovative tech and has a big production routine/archive being able to recycle older stuff and production routines into lower tier models, McLaren needs to make everything new by themselves ( no history in development , no big parent company, no shared parts with other brands (Audi/Porsche/Lambo) no other ways to safe development money/ no cash cow fashion brand selling a billion red low quality t shirts a year with an Formualr one car on them )

4. the reason Mclaren did not get money from UK government is the ppl/investment vehicles who own the company (please look it up if you'd not know what I mean) and not their actual financial situation. Secondly the mortgage on HQ/car collection did not go through till now bc the status of the car collection in regards with the Ron Dennis pay out and the money they needed to lend for this is not clear - again does not have a connection with their financials but with their in this case former owner structure

5. All McLaren Ultimate Series cars and all the LTs besides the 600LT needed you to own at least one car from them before ... its simply not true that a regular person could walk into a dealer and get a 765LT/Senna without history if the dealer does not have very good reason to sell it to them (prospect of future additional business) ...

6. in my view he highly overestimate the power of creating artificial demand (what he says works for Ferrari but for McLaren its the end of the company) reason is simple: if McLaren starts to really exclude many prospect customers (ppl with multiple previous sports and exotics car ownership - as really no one buys a McLaren as their first new sportscar) you don't create demand but many pissed ppl going back to where they came from - Porsche/Lambo/Ferrari/Mercedes etc... they don't beg to get a McLaren but are pissed and go back to one of their former sports car companies and say McLaren is a nosy company just like Ferrari is seen by many ... you can only be like what he suggests if you are Hermes, Patek, Ferrari or a 3 star restaurant with 1 year wait for a reservation ... if you are not in this situation with an extreme brand demand you will just kill yourself trying to act like such a brand ...

hope that is some food of thought or just different view on the situation ... and likely a base for discussion ... ;-)
 

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You are dead on, and I envy your satisfaction! I think just being a 911 guy, I might just do a 991.2 GT3RS and call it a day. They are 185K to 200k now and easier to service long term. I was tempted by 675LTs, 600LTs, 720s, 488 GTBs, but feel they would be dated in 3 years and on to the next best and greatest. I enjoyed my 570s for the 18 months or so I had it, but I am more afraid of fixing the 675LT or 720S over 5 year+ ownership on a used car. Otherwise, it's the warranty tax of $4k a year right?
it goes up to about $6k a year when you’re in year 8+. Yea, if there were just 3rd party mechanics a lot of the worry with owning a Mclaren would go away. 911 is a great car.

all I know is every time I look at my car I smile and get happy, and that feeling just intensifies driving it. I’m not sure I can think of a better metric.
 

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if the dealer does not have very good reason to sell it to them

When it comes to selling McLarens, the fact that someone wants one is generally a good enough reason. ;)

That's actually what I love about McLaren. No bullshit. You want, you have money, you get (more or less). Other than perhaps the Speedtail, I don't often hear of people wanting cars they don't get on here. Seems like the vast majority of people here get allocation for what they want so long as they don't wait until the last minute.

It's my impression that the people who miss out have usually just been too late to the party, not that they were denied. McLaren so far doesn't seem to have a long enough list of diehards to soak up all their production constantly.

And that's a good thing. Limited production is fucking lame. Limited production is for people who either can't stand that someone else has the same car and/or doesn't want the car bad enough to lose some money on it. Wish there was no such thing a limited production cars.
 

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When it comes to selling McLarens, the fact that someone wants one is generally a good enough reason. ;)

That's actually what I love about McLaren. No bullshit. You want, you have money, you get (more or less). Other than perhaps the Speedtail, I don't often hear of people wanting cars they don't get on here. Seems like the vast majority of people here get allocation for what they want so long as they don't wait until the last minute.

It's my impression that the people who miss out have usually just been too late to the party, not that they were denied. McLaren so far doesn't seem to have a long enough list of diehards to soak up all their production constantly.

And that's a good thing. Limited production is fucking lame. Limited production is for people who either can't stand that someone else has the same car and/or doesn't want the car bad enough to lose some money on it. Wish there was no such thing a limited production cars.
well I am not sure if they would sell a Senna or 765LT to each guy opening the shop door ... then again if you have the money to just walk in and say "hey its Monday I am in the mood for another 500k-1m car and I have the cash with me", you are maybe exactly that guy they are looking for 🤣
 

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5. All McLaren Ultimate Series cars and all the LTs besides the 600LT needed you to own at least one car from them before ... its simply not true that a regular person could walk into a dealer and get a 765LT/Senna without history if the dealer does not have very good reason to sell it to them (prospect of future additional business) .
I think now, post COVID the dealer will cite the bit you put in brackets for every 765LT sale if the prospective customer has no history. In the UK a high percentage of "regular" customers have backed out or put on hold their 765LT allocation me included so they will sell to virtually anyone as a future additional bus. customer and I can't really blame them.
 

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I think now, post COVID the dealer will cite the bit you put in brackets for every 765LT sale if the prospective customer has no history. In the UK a high percentage of "regular" customers have backed out or put on hold their 765LT allocation me included so they will sell to virtually anyone as a future additional bus. customer and I can't really blame them.
yes but that is Covid19 and not general McLaren business practice ... of course one cannot blame them in such Situation
 
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