Sabine MelicharThe be-all and end-all of investing in collector cars is the so-called “sourcing” that precedes tokenization: the platform operator must select the one with the best expected returns from many offers. Value appreciation is not a foregone conclusion and not every classic car becomes a million-dollar object. To successfully tokenize cars, a provider needs a good network and the right instinct. A company that specializes in car tokens is definitely a good choice for investors
The classic car as a token investment
The tokenization of classic cars is also opening up a new market for investors in America, England and around the world. But how does a vehicle get tokenized? We show this with the example of the car tokenization platform CurioInvest. It brings collector cars onto the blockchain in four steps:
- Sourcing
CurioInvest checks cars on the market. From many offers, the platform operator has to pick the one with the best expected returns. The sourcing finally ends with the choice of the vehicle.
- Security Token Offering (STO)
Then, as with crowdfunding, the crypto platform collects the funds to purchase the vehicle. With CurioInvest, the financing must cover the purchase price plus five years of maintenance for the classic car.
- Funding phase
The funding phase lasts three months. During this period, investors can invest in the Security Token Offering (STO). The investments are securely held by an independent third party, according to CurioInvest.
- Investment
Once 100 percent of the funding is complete, CurioInvest buys the vehicle and tokenizes it. The security tokens are now automatically sent to the investors.
If the funding goal is not reached, you as an investor should automatically get your money back. However, all capital investments with companies are risky. Before subscribing, investors are given a securities prospectus. This provides detailed information about the risks – and you should read it in detail.
Difficult investment for private investors
A feeling for the value of a property, for example, can perhaps be developed even as a non-professional. With a collector car, it becomes difficult. Private investors usually do not have the car knowledge to judge the quality of a classic car token investment. If you want to invest, you have to trust the seriousness of the provider. Unfortunately, there are black sheep in the crypto market, as everywhere – as the consumer advice center notes: “Consumers are increasingly complaining about providers who lure them into dubious investments with deals on Bitcoins, Chiliz, Ethereum, Ripple, Cardano and other cryptocurrencies.”
That’s why it’s important to get smart before investing: How long has the platform been in operation? How many fundings has it successfully completed? To what extent are the security tokens regulated? There are more and more offers: Recently, a tokenized Porsche was available. But providers like Finexity are expanding the portfolio. There is customer interest in long-term classic car investments. Investors can also acquire a tokenized Ferrari.
What should you look out for in car-invest?
Which investment is the right one depends on personal investment criteria. Anyone thinking about a token investment in America, England or worldwide should carefully study the sales prospectus, as with any asset investment. It provides information about the risks of this form of investment. Fernando Verboonen, Founder and CEO of CurioInvest, says: “The increase in value is subject to market conditions. It can therefore always deviate from one’s own expectations, even into negative territory.” When selling security tokens through the secondary market, he says, there is no guarantee that investors will get the price they envision.
However, alternative investments in collectibles such as cars also hold opportunities for investors, says CurioInvest Co-Founder and COO Valerie Halter: “Often, collectibles in particular are seen as an alternative to gold due to their resistance to market fluctuations and above-average performance. In other words, they’re popular as a portfolio addition and are usually not touched for several years.”
Buy Car Tokens: Primary and secondary markets
Basically, investors have two ways to buy classic car tokens: on the primary market or on the secondary market:
- In a Security Token Offering (STO), you buy tokens as you would buy shares in a traditional initial public offering (IPO): directly from the company. You can pay with euros, dollars or cryptocurrency.
- But investors can also secure a share of their dream car on the secondary market. Security tokens like CurioInvest’s are likely to be tradable on regulated exchanges like Deutsche Börse and the London Stock Exchange in the near future.
- Alternatively, they are available for purchase on decentralized cryptocurrency exchanges like Uniswap. Security token trading also takes place on Capital Dex. It is part of the Curio ecosystem, which is all about tokenized “real-world” assets.
Collectibles like classic cars are resistant to market fluctuations. That’s why they’re popular as portfolio additions.
Valerie Halter, COO and Co-Founder CurioInvest
What has an impact on returns?
If you buy 10 percent of the shares in a tokenized car, you are entitled to 10 percent of the future profits. However, the return on the investment does not only depend on the increase in value of the vehicle. Maintenance costs also make an impact. CurioInvest calculates here with one percent of the vehicle’s value. Maximum: A 70 million vehicle naturally does not generate seven million in maintenance costs. If CurioInvest has a good partner network, costs can be kept low. In addition, there are the so-called “economies of scale”: the more vehicles a platform offers, the cheaper custody and maintenance are.
FAQ – Frequently asked questions
With CurioInvest, the denomination is in one-dollar increments. With an STO, you have to invest at least 100 euros – corresponding to a share of 100 tokens. On the secondary market, you can also buy individual tokens and thus diversify your portfolio with shares in several cars.
You hold your tokens until the end of the agreed term. If the sale value of the vehicle is higher than the purchase price plus maintenance costs incurred, you make a profit. If your tokens increase in value during the term, you can realize your profit in advance on the secondary market.
Yes, as with any investment. If the sale value is lower than expected or the maintenance cost is higher, it can mean a loss. If you need liquidity and have to sell your tokens at the current day price on the secondary market, this can also lead to losses.
Car tokenization platforms work with specialized partners. The tokenized classic cars have to be moved regularly. This is done on rollers so that nothing changes in the speedometer reading. There are different levels of security for the safekeeping of luxury cars. For vehicles over the million mark, the rule is 24-hour surveillance with staff on site. Permanent control of room climate and light protection. Special expertise is required for the maintenance of tokenized classic cars.
Investor relations: 24-hour webcam and events
The valuable cars are locked away permanently. But car token platform operators still want to bring them closer to investors. At CurioInvest, there are continuous photo updates from the “vault”. A 24-hour webcam is planned for the future. Live transmission is not without its problems. No company secrets must be made public. Because that could jeopardize the safekeeping of the Super Cars. There is already an annual event with the investors. Those who have reached a certain investment threshold are invited. Investors are not allowed to drive their “own” car. But they can get behind the wheel of other exclusive models at events.
Who offers car and classic car tokens?
The market for security tokens is developing dynamically. Providers like CurioInvest are in the growth phase. Other players are already out of the game:
- CurioInvest: the first Ferrari has been tokenized. More collector cars are in the pipeline, according to the company. The operators have received the regulatory okay. Now it’s a matter of scaling.
- Lymited: the British portal for luxury collectibles plans to launch its own tokenization platform this year.
- ClassicCarCoin: the German company offers security car tokens on its own platform.
Singapore-registered BitCar started trading tokenized luxury classic cars back in 2015. In 2020, the platform operators had to stop business activities, as Coin Telegraph reported. Investors are to be at least partially compensated via “crypto-airdrop”. However, they will have to live with losses in any case.
Tokenized: The example of the Ferrari F12 TD
The Ferrari F12 TDF has been successfully tokenized by CurioInvest and sold to a wide variety of token buyers. The investors all have shares in the race car built in 2015, of which 799 units have been produced. The car accelerates from 0 to 100 in 2.9 seconds and costs $1,023,000. The table shows detailed figures on tokenization.
The Ferrari F12 TDF has been successfully tokenized by CurioInvest and sold to a wide variety of token buyers. The investors all have shares in the race car built in 2015, of which 799 units have been produced. The car accelerates from 0 to 100 in 2.9 seconds and costs $1,023,000. The table shows detailed figures on tokenization.Model | Ferrari F12 TDF |
Price vehicle | $ 1’023’000 |
Issue cost | $ 52’000 |
Maintenance costs 5 years | $ 25 000 |
= Fundraising goal | $ 1’100’000 |
Price per token | $ 1 |
Number of tokens | 1’100’000 |
Minimum investment STO | $ 100 |
Investment horizon | 5 years |
Target performance | 20% |
ISIN Security Identification | LI0482957227 |
