Play Money

Bavarian Scandal over Model Car Production Reveals Lucrative Adult Market for Kids' Toys

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Model cars have become increasingly popular in Germany.
  • Why it matters

    Why it matters

    Many adults consider model cars children’s toys, but in Germany they are a lucrative investment.

  • Facts

    Facts

    • A scandal involving investors in a company that sells model cars made by inmates has drawn attention to a high-stakes market in items many would consider toys.
    • Collectible model cars can fetch hundreds on eBay and even thousands at auction.
    • German model car maker CMC Modelcars specializes in reproductions of unusual antique cars.
  • Audio

    Audio

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It’s safe to say that collecting model cars isn’t exactly the sexiest of hobbies, and yet Germany is abuzz with what has been dubbed the “model car affair.” But this affair is less about matters of the heart than the love of money.

For many years Christine Haderthauer, the director of the Bavarian State Chancellery, and her husband, a forensic physician, held stock in a company that sold miniature cars handmade by mentally ill offenders as part of their occupational therapy.

A former partner in the company had filed a complaint against the couple because he felt disadvantaged in the sale of his shares. However, Ms. Haderthauer, a member of the conservative Christian Social Union, and her husband deny that the company ever generated significant profits. In a statement issued through the Bavarian State Chancellery, Ms. Haderthauer insisted that she could “fully refute the accusations.”

The affair has focused public attention on a market worth millions, one in which high-stakes auctions are rare but not unusual.

In 2007, a collector paid $35,200 (€26,365) for a 1:8 scale model of a Mercedes Benz SSK sold at auction by Christie’s. With such astounding prices being paid for toys, some investors might be advised to take a look at the small-scale world of model cars, a market potentially worth millions.

A study by the Steinbeis University in Berlin finds that model cars are among the most popular collectors’ items in Germany, next to books, coins, stamps and clocks. Apparently some 4.2 million Germans keep their miniature car collections stashed away in basements and display cabinets.

Annual sales of model cars in Germany are estimated at €250 million. When the study’s authors asked 5,000 Germans about their collecting habits, 26 percent said they considered themselves investors. They are less passionate about the items themselves than the amount of money they stand to make – which isn’t exactly trivial.

Many are willing to pay large sums to be reminded of their childhood

One of the top experts on the market is Georg Hämel, the editor-in-chief of the trade magazine Auto & Modell, who has been monitoring the popularity of individual models for decades. Miniatures that are almost entirely handmade are especially sought after and “can sell on the market for sums in the five figures,” Mr. Hämel said.

The nostalgia business is also a potential moneymaker. Skeptics need only attempt to buy a well-preserved toy from the 1970s. “It’s almost impossible,”  Mr. Hämel said.

Many are willing to pay large sums to be reminded of their childhood. Limited edition model cars by Corgi, Siku and Matchbox, once bought for a few Deutsche Marks, now sell on eBay for hundreds and sometimes even thousands of euros.

Model car collectors are usually men, with most ranging in age from 40 to 60. This helps to explain why many are particularly fearful of two things: Dust and the fury of their wives when they have just spent too much money on yet another high-priced model car.

Collectible model cars are good business for CMC Modelcars, a medium-sized German company based in Fellbach near Stuttgart. The company’s model cars are top sellers among collectors worldwide. CMC goes to great lengths to create miniature copies of original cars.

“Our products are not mass-produced, and they’re certainly not toys,” Product Manager Werner Junginger was quick to point out. Once they are sold, CMC’s luxury model cars are quickly placed inside dustproof glass cabinets. Touching these works of art is strictly “verboten” for anyone unfamiliar with their value. For owners, CMC model cars are there to look at and admire – and that’s all.

Each model is based on an original piece. Mr. Junginger scours museums and the collections of affluent private citizens for unusual antique cars. He is especially proud of a miniature version of the Bugatti 57 SC Corsica. The original is parked in the museum of California millionaire John Mozart, who gave Mr. Junginger special permission to take the luxury car’s measurements.

“We took almost 3,000 photos of the car and used lasers to digitize the exterior,”  Mr. Junginger said. The method makes it possible to document the dimensions of any car in minute detail, but the effort has its price, with CMC miniatures costing an average of €350 apiece. Older, limited-edition CMC cars are easily worth twice as much on the market.

However, that market in Germany is shrinking, due to a lack of younger collectors. Many aficionados are also running out of space in their basements and glass cabinets, so that experts recommend investing in models that are in demand internationally.

“But you also have to have a good nose for it,” said Christian Wrede, 46, of the eponymous auction house for plastic model cars. Mr. Wrede has often seen miniatures fetch up to 25 times their original price after a few years. On the other hand, models that are now being sold at auction for high prices are hardly good investments. “Those who buy high have already lost money,” Mr. Wrede warned. Instead, he advises collectors to invest in models that are not yet in great demand but have scarcity value and are very well made.

For instance, a collector who bought BMW Art Cars in 2003 could be sitting on a veritable treasure chest. Model car collectors, BMW fans and even art enthusiasts are extremely interested in the limited series of 16 models. And besides, BMW sold the miniatures for almost nothing at the time.

But there is one caveat: Collectors are only interested in models in their original packaging. The rule of thumb is that a collector’s item loses about a third of its value once the box has been opened. In other words, the only time investors can truly derive pleasure from their cars is when they resell them.

Translated by Christopher Sultan

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