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Tokenization of classic cars: tokens as a profitable investment?

Maybe you can’t purchase a luxury car for cost reasons. But thanks to tokenization, you can participate in noble collector cars as a private investor – with little investment capital. As with any investment, the same applies to car tokens: there is no return without risks.

Classic cars not only have a positive image emotionally. They are also exclusive. That makes them an attractive investment product. A scarcity by definition and high value stability allow the classic car market to generate above-average returns. The German Classic Car Index DOX of the German Association of the Automotive Industry (VDA) shows an increase in value of 164 percent since 1999. In the classic car index of the Stuttgart-based Südwestbank, classic cars regularly outperform stocks and German government bonds. Some models outperform others, as our chart shows:

Performance of classic cars 2016 – 2019

3 Series (E21)
Series 02
VW Beetle
VW 181
Eisenach plants
Wartburg 353
6 Series
Alfa Romeo
Source: German Federal Motor Transport Authority / German Association of the Automotive Industry

Luxury cars: asset class for the rich only

Classic cars are attractive as an asset class. But: anyone in America and England who wants to invest their money in a classic car has to put up capital in the six-figure range. “The best chance that an increase in value covers the cost side and also results in a profit is certainly more likely with vehicles beyond the 250,000 euro limit,” says Oliver Grimme of Hypovereinsbank in an interview with Driven Luxury Cars. With a portfolio diversification, which distributes the risk over several vehicles, it goes fast around seven-digit amounts. Historic vehicles have therefore been the preserve of an exclusive group of wealthy market participants.

Tokenization: One Car in 1000 Tokens

Thanks to tokenization, you can invest in classic cars in America and England even as a private investor with little investment capital. Blockchain technology allows values to be digitally mapped and transferred. In this way, it creates small-scale investment access to capital-intensive tangible assets

Specifically, it works like this:

  • As an investor, you can participate in a car from an investment amount of 500 euros.
  • A 500,000-euro classic car is divided into 1,000 tokens.
  • The provider takes care of maintenance and repair.
  • You profit from the value development.
  • To spread the risk, you can buy different car tokens and build a classic car portfolio.

Token investment with risk of loss

Classic cars are not an alternative to classic investments in a securities portfolio or real estate. They are rather interesting as a supplement in the portfolio. Oliver Grimme comments: “You should not be faced with financial ruin if the property does not bring the hoped-for growth. With classic cars, insurance, taxes or workshop are added as significant cost items.” As an investment, classic cars are therefore speculative. Because the danger of losses always exists

What speaks in favor of luxury cars is that the performance of non-bankable assets typically does not depend on that of conventional, liquid assets. That’s why they are suitable for risk diversification: so if your stocks fall, your car token may well increase in value.

FAQ – Frequently Asked Questions

Is there a risk of loss with car tokens?

Yes, as with any investment. The value of a tokenized classic car or sports car depends on the market. It is not guaranteed that the value of the classic car tokens will increase – it can also decrease. If you are forced to sell your shares, you will lose money. However, as a small investor, you can limit the risks. Buy only small stakes in a tokenized asset. Tokenized cars allow you to build a portfolio and spread the risk. If one makes a loss, the good performance of another car makes up for it.

Can I drive a tokenized car?

No, in most cases you can’t. The tokens do not grant you, as an investor in a tokenized car, the right to use it. You are not allowed to drive the car. You do not have direct access to the car. In return, however, you also have no obligations whatsoever as far as maintenance and servicing are concerned.

What rights do I have as an investor in car tokens?

Car tokens confer ownership rights: you own a share in the car, along with everyone else who participates with tokens. Your rights are written down in the so-called smart contract. It is advisable to read carefully the rights associated with the purchased token. As an investor, you take a risk: you have to trust the issuer to actually keep the promises associated with the respective token.

Who offers car tokens?

The tokenization of classic cars such as a tokenized Porsche is still in its infancy in Germany. However, there are already providers where you as an investor can invest in car tokens:

  • The Liechtenstein-based investment platform CurioInvest wants to bring 500 noble collector cars onto the blockchain. Value: over 220 million dollars. Investors can participate in the first tokenized Ferrari, among others, in the form of Car Tokens. Digital trading will take place via the decentralized crypto exchange Curio Capital Dex, which will be launched at the end of 2020.
  • At the Cologne-based startup ClassicCarCoin, you as an automobile-savvy investor can acquire ownership rights to classic cars via security tokens. The company founders take care of the vehicles. As the owner, you participate in the increase in value. Currently, trading in the tokens still takes place exclusively via the company website.

The Ferrari F12 TdF: The first tokenized sports car

The original ex-factory retail value of the 2015 Ferrari F12 TdF was $450,000. A year later, a car dealer sold one of the 799 limited edition special models for more than three times that amount. In 2020, the company CurioInvest put the design classic on the blockchain as the first tokenized luxury automobile. The value has been determined there on a daily basis ever since. By 2025, investors should be able to achieve a return of 20%. More about Ferrari Tokens

Sabine Melichar

Editor | MBA University of Cologne / San Diego State University.
Main focus: Tokenization | Enterprise Digitization | Vocational Education | Society

Sabine Melichar

Redakteurin | MBA Universität Köln / San Diego State University
Schwerpunkte: Tokenisierung | Digitalisierung von Unternehmen | Berufsbildung | Gesellschaft