Hong Kong sports car business hits the skids

http://i281.photobucket.com/albums/kk225/chuntn/DSC00174.jpg
Photo by chuntn from a Hong Kong discussion forum.

HONG KONG, Dec 23 (Reuters) - It's a business with a history of riding out economic slumps, but Hong Kong's sports car dealers say sales have all but skidded to a halt.

While the city's ubiquitous sports cars and luxury vehicles may not be an official economic indicator, they have symbolised the amount of money that's flowed into this Asian financial hub in the last decade.

Now they're showing just how much money has flowed out.

"This car usually wouldn't last here for more than a week," said Edmund Cheung, who manages a used car dealership, as he passed a silver 2007 BMW convertible priced at HK$698,000 ($90,000). "It's been a month now."

Even in 2003, when Hong Kong's economy was hit by the SARS virus outbreak, dealers say slick, pricey cars still zoomed off the lots. But the city, like the many other parts of the world, is in a recession now, and its economic picture is darkening.

For some of the more niche dealers, such as Lamborghini, sales still appear to be holding up.

But for those who are accustomed to selling a barely driven Jaguar to a local entrepreneur or a newly arrived expatriate banker, times are tough.

Sales last month at the second-hand New Method Motors automall where Cheung works were a mere 92 cars, worth HK$40.8 million, according to the mall's monthly sales tally. The mall is used to selling more than double that per month.

With roughly half of the sales coming from foreign residents, what worries Cheung is not only the amount of Western bankers and lawyers getting laid off, but the lack of financing for the ones who have just arrived.

"Banks are really, really strict. It's crazy," he said.

Not far from where a black Ferrari is on sale for HK$2.85 million, Ken Lee sits at a desk waiting for customers.

He echoed concerns about lack of financing, adding that buyers are having to fork over more cash. How does the current environment compare to when the SARS outbreak hit Hong Kong?

"It's worse. In 2003, you could still sell 200 cars," said Lee, of Techwin Motors Limited.

NICHE MARKET HOLDING UP

Max Cheng is a brand manager at Lamborghini Hong Kong who runs the dealership. His customers fill out orders for the cars and he has them shipped from Italy where they're made.

The convertible model on display at the showroom where he works can travel 320 km per hour and costs HK$3.4 million.

"Will it hit our product? Yes," he said, when asked about the financial crisis. "How bad? I can't predict."

Sales at the dealership are up this year, he said, to 50 cars from 38, a factor he attributes to the fact that Lamborghinis are more of a niche market. Buyers often pay entirely in cash.

But for the more mainstream sports cars dealers, there appears to be a glut of fancy, brand new cars sitting idle.

Patrick Botelho of Well Done Motors says the cost of financing for cars has gone up to around 50 percent or loans are just not given.

The dealers themselves are in the same position. Usually, if they can't sell a car within three months, they can refinance a loan to extend repayment. Banks have tightened these up as well.

Botelho is also getting calls from customers asking him if he'll take a car back. The Porsches and their ilk in and around his lot aren't moving fast enough, he said, causing him to turn away most of those offers.

"We're overstocked," he said. "Supply is bigger than demand."

Hong Kong's roads clogged with supercars
23 December 2009
Agence France Presse

Hong Kong's roads read like pages ripped from a luxury car magazine.

Hundreds of ultra-flash motors from Ferraris, Lamborghinis and Porsches to Aston Martins, Rolls-Royces and Bentleys, inch through traffic on the city's clogged and smoggy roads.

Even taxes of 120 percent don't deter Hong Kong's uber-rich from splashing out on the latest super-expensive 'boy's toy' -- with dealers seeking to import as many supercars as they can get their hands on.

In the lead-up to Christmas, Marchy Lee's CarPro showroom contained a Lamborghini Murcielago LP650-4. There were only 50 ever made and this was the last one on sale in Asia. Price on the road? A bank account-buckling 800,000 dollars.

Or, there's always the cheaper option, a stunning black and gold Ferrari 430 Scuderia -- a snip, at 520,000 dollars.

"You buy this car, you want to be driving on the road and for some people to take a good look," Marchy said from the Murcielago's driver's seat. "There are a lot of supercars in Hong Kong, even though it's a very small place.

"A few successful Hong Kong businessmen own 30 or 40 supercars. They are big boys and they need to buy toys. So these are their toys."

But it's not just the boys.

Nicole Wang, a banker, zips out of a parking spot in Hong Kong city centre in her Audi R8 -- worth around 300,000 dollars -- straight into a traffic jam.

"I chose this car because it suits my character," she said. "It's not for middle-aged men. It's very special and very rare in Hong Kong -- there are only about 50 here right now."

Many young boys like to play with toy cars, perhaps having a Ferrari, a couple of Porsches and maybe an Aston Martin parked in their toy box.

But when Terence Ku grew up, his toy box became a real garage. He owns 16 cars worth around two million dollars.

He imported a beautiful pearl white Aston Martin DBS from Britain because of his love of James Bond movies and a Ferrari 360 CS because of the engine's deep and distinctive growl.

But Porsches are his favourite. He owns six.

"I love Porsches," Terence, said. "But I'd put the Ferrari 458 at the top of my Xmas list, I don't mind having to wait until next year."

Terence, who owns a printing and publishing company, admits Hong Kong is not the best place for the motorist.

"It's too expensive here and it's too small. There's no good roads to drive on. That's why we get together and go away on road trips."

Many Hong Kong car enthusiasts such as Terence join clubs and often ship their pride and joy to China or Malaysia -- sometimes even to Germany -- so they can enjoy them properly on the open road.

Benjamin Lam, chairman of the Porsche Club Hong Kong, recently led a convoy of Porsches on a trip across China.

"The traffic is not very good in Hong Kong," he said. "You've got traffic jams everywhere, even at 3:00 am. And the public transportation is very good, so you don't even really need a car.

"That's why we're always shipping our cars overseas. We like to drive on the open roads. We're all passionate about our cars."

Bentleys and Rolls-Royces seem to be the luxury cars of choice for the "older gentleman" in Hong Kong, as well as for hotel limousines. Hundreds of the graceful classics glide silently through the streets.

Rolls-Royce immediately sold 20 of its new Ghost when it made its debut in Hong Kong in September.

The new 'smaller and more dynamic' Ghosts cost around 550,000 dollars on the road and are built to order to the buyer's specification.

"Hong Kong has always been an important market for Rolls-Royce," said Jenny Zhang, general manager of Rolls-Royce Greater China.

"All our customers have one thing in common despite where they are from -- they are all highly successful individuals who are passionate about the Rolls-Royce brand."

Any rich man or woman who fancies a new supercar this Christmas needs to immediately double the price tag if they want to take it out into a traffic jam.

Marchy Lee explains: "The tax in Hong Kong is very, very high. All cars over 500,000 Hong Kong dollars (64,500 US dollars) are classed as luxury brands and are taxed at 120 percent, after the first third.

"So, to buy one of these ultra-niche cars, you have to really want one -- and have a lot of money."

But that hasn't stopped shoppers at Marchy's small dealership -- he's sold around 40 supercars since the company started almost two years ago.

And the Ferrari 430 Scuderia has already sold -- somebody's having a very Happy Christmas.