Christie’s International Motor Cars has withdrawn a multimillion-dollar vintage race car from auction, in a move that illustrates the risks associated with treating high-priced collectibles as legitimate investments.
On 9 February, Christie’s said it was postponing the sale of a 1939 Auto Union Type D, “pending further exploration into the car’s race history”.
The company had planned to auction the racing car, considered a rare example of one of the great names of the sport, on 17 February in Paris. Auto Union—the forerunner to luxury-carmaker Audi AG —and its German competitor, Mercedes-Benz, then dominated the Grand Prix circuit.
Christie’s had estimated the car, which the auction house said Hermann Mueller piloted to victory in the 1939 French Grand Prix, would fetch $12 million to $15 million. That would be a record for a car sold at auction.
“It’s strange that such a high-value car be withdrawn a few days before the auction after all the time and effort devoted to marketing. It’s unheard of,” said Simon Kidston, a Geneva consultant to collectors of high-end autos. “You don’t market the car for six months and then say you have to research it.”
Prior to its withdrawal from sale, the single-seat racer with a polished-aluminum body and rare rear-mounted engine exuded awe, power and history.
“It’s one of the ultimate cars of all time,” Kidston said, before the postponement. “It’s rare; it sounds wonderful; it looks like nothing else, and it’s got that aurora of intimidation.” Just before being killed in an attempt at a land-speed record, Bernd Rosemeyer in 1938 pushed a predecessor machine close to 270 miles per hour (434km per hour).
Both the Auto Union and Mercedes racing projects were partially subsidized by Adolf Hitler, who saw their victories as evidence of German technological prowess. The Christie’s auction catalogue alludes to “the German chancellor” but never mentions Hitler.
“His name is obviously a sensitive name to many people, and we don’t wish to draw any more attention to him,” said Rupert Banner, London-based head of the car department at Christie’s. “And he has no direct relationship to the vehicle.”
True enough. But come on. It wasn’t Konrad Adenauer who financed these automobiles.
Josef Stalin also has a part, albeit a more tangential one. Following Germany’s military defeat in 1945, the Red Army confiscated about 30 Auto Union racing cars and shipped them back to the Soviet Union, most likely to examine their engineering, according to Christie’s.
There’s also speculation that Vasily Stalin—Soviet air- force general, car aficionado and Big Joe’s son—sought to build a Russian race team, according to 8w.forix.com, a not-for- profit website for motor enthusiasts.
After being variably disassembled, cut in half and left to rot, five cars survived, Banner said. Audi owns three, one of which is on display at the company’s museum in Ingolstadt, Germany, and an Asian company has one. The fifth, first discovered in Kharkov in the 1980s, is the car that was to be auctioned at an extravagant price.
That raises the question of whether classic cars are legitimate investments or just high-priced toys for big boys.
The answer is mostly the latter. The market for vintage cars appreciated at a steady pace in the early 1980s, soared in the second half of the decade, only to collapse in the early 1990s.
“It went down as quickly as it went up,” said James Knight, head of the collectors’ motoring department at auctioneers Bonhams in London. “It was a pretty miserable time in the collectors’ motor-car market. People don’t want to buy a car if they feel in a year it will be 30 to 40 percent lower.”
Car owners who had borrowed to feed their habit faced a choice between servicing their mortgage or their car loans. They opted to keep their homes, prompting banks to repossess the vintage vehicles, dump them onto a fragile market and further depress prices. “Banks collect money; they don’t collect cars,” Knight said.
By 1993, the market bottomed, and confidence since has steadily returned.
Wild and Woolly
At what these machines sell for, you had better know what you’re doing, or it’s bye-bye pocketbook—no matter how much cash you have to toss at a pastime. If you think emerging-market debt and equity investing is volatile, it’s nothing compared with racing cars, whose prices can be as wild and woolly as the sport itself.
Consider the following: In late 1987, an Englishman paid about £1.5 million or about $2.7 million at the time, for a 1955 Mercedes Formula-1 car that had been raced by the great Juan Manuel Fangio. In May 1990, just two-and-a-half years later, a Frenchman shelled out about $20 million for the same vehicle. It still stands as the highest price ever paid for a car in a private sale, Kidston said.
He said the investor’s logic was that if a Vincent van Gogh painting can go for $50 million—his Irises sold for $53.9 million in late 1987—less than half of that for the only post-war Mercedes Formula-1 car not owned by the manufacturer made sense.
So much for hard-nosed logic. In 1999, a German paid the Frenchman an estimated $10 million for the same hunk of metal. In 2003, it was sold again to a Middle Eastern investor. “It’s safe to say for somewhat more than $10 million,” Kidston said.
“You shouldn’t buy cars unless you will derive the fun factor—the pleasure of ownership, the pleasure of knowing that it’s in your garage and, of course, the pleasure of driving the car,” Knight said. “First and foremost, it’s a hobby.” Bloomberg
“You shouldn’t buy cars unless you will derive the fun factor — the pleasure of ownership, the pleasure of knowing that it’s in your garage and, of course, the pleasure of driving the car,” Knight said. “First and foremost, it’s a hobby.”
What’s more, unlike equities, owning cars entails paying storage, maintenance, repair and insurance bills. “Shares require no maintenance,” Knight said. “Equally, you can get a lot of fun out of a car. You can’t get much fun out of a share certificate.”
Still, if you think $15 million is too steep or harbor doubts about what your bidding on, for several hundred dollars, you can buy one of the almost 100 pedal cars Christie’s is auctioning on Feb. 16.