Ok, So What the Heck Happened in Monterey?

Monterey Car Week 2019 is done and in the bag. As with most years there was a considerable degree of drama. Unfortunately, unlike most years, it was largely moving in the wrong direction. Preliminary sales totals indicate a gut punching $245.5 Million between the 6 houses collectively. This represents a significant 34% decrease over 2018’s $370 Million haul as well as decreases in all the important categories, including average sale price (down $117k), median sale price (down $5,500), and sell through rate (down 4%). Sell through rate on feature offerings took the biggest hit dropping from 56% to an anemic (for Monterey anyway…) 42%. This represents the lowest overall set of results for Monterey since 2011. There were most definitely some notable sales, including and LM-spec 1994 McLaren F1 that crossed at RM Sotheby’s for $19.8 Million, a 1958 Ferrari 250 California LWB Spider from Gooding & Company at $9.9 Million, and a 1962 Ferrari 250 GT SWB at RM Sotheby’s that did $8.15 Million, but most of these still felt like they somewhat under-performed (even though the LM was a record setter in a few categories) and still failed to overshadow this year’s misses. We can spend all day breaking that stuff down in specifics, but from my perspective, and for the most part there is no news to discuss there. When talking about no sales, nothing was sold, no money changed hands, nothing happened, so we’re moving on…..

Either way, a lot of stuff did happen this year across a broader spectrum a lot of it could prove to be game changing, at least for the interim.

High End Fatigue and Foolish Expectations

At this point in my career I’ve been around more than enough big kid collectors to understand that in a lot of circumstances very high-end cars are stressful to deal with an awful lot of the time. Of course, there are those guys that are more than willing to hop in their DB4 Zagato and drive from Seattle to Miami, but its been my experience that these things generally get over maintained, moved very little and at the end of the day, all of this is a lot of work and pretty heavy fodder for chronic anxiety attacks. When you have a situation where one part of the population is getting older and another part is just coming in and testing the waters, these types of scenarios becomes less desirable. Couple that with the fact that for the last six years, we have all been utterly bombed with one insane headline after another touting some previously thought to be unreachable milestone and its starting to wear people out. I’ve seen this general exhaustion reaping benefits for a lot of my clients on the dealer side. People are feeling worn out by the three-ring/big top nature of the auctions, getting nickeled and dimed on everything and are hitting their showrooms as an alternative. Once they get there, they are walking past the bigger-ticket items and going for things like Alfas, late model exotics with warranties or easily managed American offerings like GTOs and Chevelles. God forbid if a great looking lightly resto-modded 1968 Mustang Fastback with a 5-speed, updated brakes and R134a walks in the door. It’s gone before they can even get the paperwork together to properly put it on the floor, and at whatever crazy price the dealer wishes to throw out there. Point is, people seem to be getting to a point where they just want to have fun again.

With this said (might as well acknowledge the little German elephant in the room early…), I’ll be the first to admit that for that fleeting second, I was absolutely glued to the Roku fueled TV in my insurance company provided hotel room in (not so) beautiful San Tan, Arizona (more on this below), throwing out reckless text messages by the dozens, with absolutely zero doubt that I was seeing a priceless piece of sports car history exchanging hands for 40, 50, 60 million and rolling. Why wouldn’t I? Clearly, I’ve also been conditioned to not only assume, but expect and feel entitled to the impossible. After two superhero 250 GTO sales in 2018 and a bunch of British ones during previous episodes, it’s easy to assume that a manufacturer other than Ferrari will ascend to that level. Anyway, it was also very easy to hear what I wanted to hear, and I expect I wasn’t alone. The problem is, maintaining this level of absurdity is completely unsustainable in any marketplace (that isn’t fine art) and eventually that well is going to run dry. I’m not saying that happened in Monterey this year, but it might be time to turn off the hoses, put the Slip ‘n Slide away for a little while and just concentrate on watering the houseplants again.

 

Highly Predictable Marketplace Shift

I hate to say I told you, but I did. As I’m reading other recaps and accounts, there seems to be a little bit of ill placed blame going around. Lots of folks seem eager to point to the threat of recession, or political craziness (reminder: if you puke your “go team” political crap on this page anywhere, I’ll block you immediately – regardless of what side you swing for), or whatever, but this industry has traditionally done very well in times of economic downturn. Think about where this industry was in August of 2008 vs August of 2014. In just that time period alone, Monterey sales jumped from a respectable $138 million to an insane $403 million. This means, while the rest of the world was losing their houses, collector car sales in Monterey alone jumped 192%. Moral of the story? In regard to the overall health of the economy, only difference is what side of things is thriving. The fact of the matter is, for now, the economy is still pretty strong for the most part and this effected Monterey exactly the same way it also effected Scottsdale this year. The lower end did well and the top end stayed home. We’ve seen this before. When the economy sucks for the common man, the big hitters come out to play. When it’s doing OK, they don’t and the opposite end has the fun. Another factor to consider this year, was the seeming inability of the auction houses to control their consignors’ expectations. Although, like every series of auction events, there were deals to be had, a lot of cars didn’t sell that should have. This breaks down to over inflated reserves. Sure, there were a ton of cars offered this year, and I’m sure that required a lot of elbow grease, but if you can’t sell them, what’s really the point? This stated however, basically all of my clients that were active in Monterey this year did exceptionally well. Those that were selling brought 280SL’s and E-types and the like (sub $250k cars), they crossed their T’s and dotted their I’s pre-auction and got what they were looking for or better (in one case MUCH better). Those that came to buy, for the most part got the cars they wanted, for what they wanted to pay (or less) and those that were there for the purposes of doing business or pushing brand objectives, successfully did lots of that. If you read past the headlines, Monterey 2019 was still a success. It just didn’t provide the craziness that we are all so accustomed to seeing.

Monterey and the Surrounding Amenities

Not so funny story: As some of you may know, I had to last minute cancel my trip to Monterey this year, because of a series of personal emergencies. One of these said emergencies was a construction accident that essentially destroyed my house and almost everything in it completely. Wednesday afternoon, the insurance adjuster assigned to the situation called me in the apartment, for which I have been displaced for probably several months, demanding that I get my poor Alfa (also a victim) out of the garage and put it somewhere semi-permanent by Thursday morning so that environmental services pros would have easier access to everything. My initial thought was “who’s going to answer their phone right now?” The real worry however was, “I’m screwed! Everybody is in Monterey!” Turns out a lot of people answered their phones (or called me back pretty fast) and virtually nobody was in Monterey. While this was a bit of a surprise to me, the reason for it wasn’t. After securing hotels, cars, event passes, etc for myself and 3 of my team members, it was painfully obvious, what is always painfully obvious – Monterey is EXPENSIVE. Of course, we all already know this going in, but this year seemed especially extreme, and this was echoed by nearly all of my Alfa’s would be babysitters. “I’m willing to pay $400 for a BS roach motel, but I’m not paying $700”. Hotels and other amenities really pushed their luck this year and I think it effected the results overall. It’s certainly easy to assume that a bunch of people who are planning to spend millions on toys can afford to pay whatever somebody asks, but that doesn’t change that fact that they will immediately close their wallets if they feel they are getting taken advantage of. At least around here, that’s something that definitely happened, and a lot of people sided with defiance and stayed home, choosing not to participate as a result.

 

Auction Houses Have Been Taking Too Many Things for Granted

Ok, so I bet I know what you’re thinking here. Were the prices of drinks up? Yup! How about certain forms of admission? Seemed like. Were comp/media/etc passes harder to get this year? Sure were! Based on the accounts of my team members, media partners and clients alike, theses were certainly annoyances, but that’s not what I’m talking about. What I’m referring to is the way that the houses sometimes assume they are bigger than their most important components: the people that make them run (here’s where I’m going to finish talking about that “kleiner deutscher elefant”). For anybody that’s been to, watched, or in anyway experienced an RM auction in the last few years, it’s been overwhelmingly noticeable how difficult it has been for them to replace Max Girardo. Although, prior to last week it has been more low key noticeable, it’s now undeniable to all of Earth, what a colossal mistake it was for RM to let that guy walk out the door. I don’t want to place any illusions that I know what happened behind the scenes in that situation, but I do know everybody has their price (whether it be financial or treatment related or other) RM obviously failed to meet Mr. Girardo’s and now they are paying for it handedly. When you have superstar level talent in house like that, its important to keep it happy and producing and not assume that everybody is immediately replaceable. Sure, the New England Patriots would still be a good team (they still have Belichick after all), but do you think they would have won all those Super Bowls had Tom Brady quit or jumped teams in 2004? Probably not. Despite their efforts to bring in other snappy, multi-lingual guys with cool accents, RM are right now, the New England Patriots living in a post Tom Brady universe. Other houses have certainly made similar errors, but this one was made painfully apparent last week and as we all saw, it’s about as real as it gets. You are only as good as the people who represent you and taking that for granted is an expensive mistake.

Moving Forward

So, what happens next? This unfortunately, is a bit of a loaded question, as things like the above stated economic and political conditions will likely play a role. If things keep going the way they are, assume that the lower ends will continue to be strong. If we plunge into recession its historically been proven that the top will somewhat return (it likely won’t happen overnight – everybody else is going to have to get hit first). As referenced above, another thing to consider is that the generational transfer of wealth is beginning to occur. That likely continues to bode well for things like retromods and other “toe in the pool” kind of offerings. Best advice is to stay below $75,000 and try and look for rare, unique, or largely unused, “in the wrapper” examples with room to grow. Is the potential of a consolidation of the marketplace a real possibility? It would be foolish to assume otherwise, but at the end of the day the bigger players roles will mostly remain unchanged and although that may affect the overall numbers, it probably won’t in regard to where the actual work is getting done. Sexy headlines or not, there’s plenty of action in that realm and thus there’s nothing about this game that should be considered dead or dying. Much like any other investable market, evolution is a factor and this years Monterey Car Week demonstrated that fully.

 

 

 

 

Darin Roberge is CEO of Motorwerks Marketing and is a Marketing and Media Consultant in the Specialty Automotive and Live Events industries. Darin has been named a Business Trendsetter by Arizona Foothills Magazine, is a two-time nominee to Phoenix Business Journal’s 40 Under 40 list and is one of Sports Car Market Magazine’s 40 Under 40. Learn more about Darin at www.MotorwerksMarketing.com