The mystery of selling supercars

Every year at least one startup wants to enter the supercar business. The margins seem appealing, the market is booming even though the rest of the automotive market is rather volatile. Still nearly none of them makes it. In this article you will find some reasons why.

The new guys are not hyper enough: since Koenigsegg and Pagani created the hypercar segment, super just does not suffice anymore. Since a mainstream manufacturer in the form of Bugatti came along in this segment and dominated it from a technological and commercial perspective, it had become the new benchmark for the ultimate sportscar. Supercars just were not enough anymore.

With common sportscars (such as the C6 Corvette Z06), as well as fast saloons (such as the Mercedes E63 AMG) offering more than 500hp and acceleration figures from 0-100km/h of less than 5 seconds and all of them offering at least 250km/h (frequently limited) top speeds, it is nearly impossible to compete on these performance characteristics.

Buyers of the vehicles in this segment want Top Gear's Clarkson to be able to say that it is or has the most of something 'in the world'. It needs to be the fastest, like a Koenigsegg. It needs to be the most extravagant or artisan, like a Pagani. It needs to be the most expensive, like a Bugatti. Anything which gives the owner bragging rights and the rest of the world compensation joke thoughts.

Strangely enough it does not have to be the most exclusive. Whenever Ferrari wants to sell a limited edition vehicle, it tends to sell all of them before production even started. One example is the recent LaFerrari, of which all 499 items were pre-sold. Given the brand's total annual sales of 7000 vehicles or the production numbers of the established competitors Lamborghini and McLaren, this does not seem that exclusive at all. The same goes for the 375 items for the McLaren P1. Porsche did not manage to pre-sell all its 918 Spyders, but with 918 planned items and the $845k price tag, that is not too surprising. That they already managed to sell about two-thirds of them, is nothing less than impressive.

So why have the other accepted hypercar manufacturers such a hard time selling only a limited amount of vehicles? Bugatti is struggling to sell the last vehicles of its planned 300 items production run for the Veyron, Koenigsegg never goes over 20 vehicles annually and Pagani manages to keep its production numbers below the radar.

There are a few factors which help selling these million dollar hypercars.

Newness is a major sales element and one often misunderstood by the newcomers. Most of these startups show their products to the market in the early prototype stage. If they manage to reach production, the vehicles have taken several years to reach maturity. When the final items are presented to the market, everyone thinks it is an old design because they were allowed to become familiar with it for several years. Just ask Spyker how deadly it is to show a new prototype every year on the Geneva motorshow, while never managing to get it into production before the next showcar is presented. All pre-ordered vehicles will be cancelled by this point, since nobody wants to pay the premium price for last year's model. This usually happens anyway if this spoiled customer group has to wait for more than a year on something they crave instantly. Be like Gordon Murray and only present when you are ready to sell.

What worked for a while for the hypercar niche manufacturers, was to offer limited editions of their vehicles. Bugatti had a few World Record specification vehicles, Koenigsegg had their Edition, the Trevitas and now the One:1, while Pagani had their Cinques and Tricolores.
This strategy seemed to work better than the one-offs. Bugatti has been using this exclusively since a few years and Pagani used it as well for about a dozen of Zondas after the production of this model officially ended. This strategy seems exhausted by now as well, since every vehicle was specified uniquely anyway.

Having the latest and greatest technology seems to be another obvious sales argument. Strangely enough it is more the perception of technology than the actual state-of-art or advanced level of the vehicle construction. No educated person would want two powertrains in one vehicle, due to complexity, mass and costs. But still that is what the world just witnessed. It happened because of the public opinion regarding how ecological hybrids are supposed to be, as well as this being the only way to fool the regulations regarding consumption and emissions if you want to achieve certain performance figures.

So what makes it possible to sell cars in this segment after all? It seems to be a combination of heritage and credibility.

Heritage can only be achieved over time and time is the scarcest resource for a startup. Buying a brand with all its fame and glory like Spyker or many others did, might be a worthwhile investment. Having racing successes helps, though only old race successes are considered to be worthy of extra appreciation. Vroeger was alles beter.

Credibility can be achieved in several ways. Being consistent with performance is a major contributor. Being able to confirm competitive claims helps as well. But also for credibility it is true that time is the most important factor to achieve it. Since time is money and startups tend to have neither, it is not very likely that they will succeed.

Unfortunately the old saying 'The fastest way to become a millionaire in the sportcar business is by starting as a billionaire' still holds true. It will be interesting to see if new players will be able to make it. As Koenigsegg and Pagani have proven, it is not impossible. They had to create a new market segment to achieve this. Is this necessary again? Time will tell. To those who want to try: godspeed and please read the above... ¤

This article first appeared on my now defunct website on 2014-07-17