Ferrari CaliforniaEnlarge Photo
Its booming economy has created huge demand for high-end luxury and exotic cars, but there’s a growing pool of evidence to show that the Hong Kong market is cooling. While sales of new ultra-luxury cars are up over last year (largely due to the introduction of new models, or additional allocation of existing ones), the used market for luxury cars has dried up.
In Hong Kong, the ultra-wealthy buy new cars without regard to economic conditions, while the merely affluent have traditionally shopped the more price-sensitive used car market. Bloomberg is reporting that this used car business has fallen by some 50 percent over the past two to three months, indicating uncertainty in the financial sector.
One Hong Kong used car dealer, Tommy Siu, explains it as, “The more expensive the car, the more dry the business. A lot of bankers don’t want to spend too much money for a car now. At this moment, they don’t know if they’ll have a big bonus.”
Bill Russo, a senior advisor at Booz & Co. in Beijing calls it a “pulse check on how Hong Kong residents view the stability of the financial system.” In other words, those with jobs in finance aren’t just concerned about the size of their bonus; they’re concerned enough about having a job in the coming months to avoid any non-essential big-ticket purchases.
The outflow of expatriates from Hong Kong has also hurt business. Tommy Siu counts on foreign workers for some 70 percent of his business, but finds that many former customers are leaving Hong Kong. Worse, he says that, “for every 10 who are leaving, two are coming.”
The net result is that pricing for used supercars in Hong Kong is dropping. A 2011 Lamborghini Gallardo 550 can be had for $371,000, which is $830,000 less than the car would cost new. A low-mileage 2011 Ferrari California can be had for just over $345,000, which is about $81,000 less than the cost of a new California.
Before you jump on a plane to Hong Kong in search of cheap exotics, consider this: when new, a 2011 Lamborghini Gallardo LP550-2 sold for $219,800 in the United States, while a 2011 Ferrari California sold for around $192,000.
In other words, Hong Kong prices still have room to fall before being attractive to buyers in other markets.