#25 - Porsche 2.0

As business models go, Porsche have unequivocally nailed it. While the likes of Aston Martin and Jag Land Rover circle the proverbial automotive drain and the rest of Europe’s largest manufacturers flounder in a lacklustre growth environment, Porsche achieved a 10% increase in YoY vehicle deliveries in 2019 which was led by a 15% growth in European sales. What’s more, the 992 was named globally as the most profitable vehicle of the year with a gross margin of 47% and the new Taycan has amassed an order book of over 30,000 deposits which makes the new Aston Martin DBX with just 1,800 orders pale into insignificance. But the best bit…this is the same Porsche that makes ludicrous stuff like the GT2 RS, GT3 RS, Speedster et al.

All of the above merits aside, their success has led them to a potentially controversial crossroad for their strategy moving forward. If you think back to their initial sortie into the SUV market in the early 2000s, it was very easy for them to leverage the VW platform with a bit of Porsche technical zest to create the Cayenne. After all, it wasn’t the first time they had Porschified a common rail product and turned it into something a little more exciting….just think of how the Audi RS2 was spawn from an 80 Estate. And it was a similar story with the Panamera and Macan. What’s more, the revenue stream created from these 3 mass market models has allowed the company to throw even more money at the quirkier and niche track toys we spend our free time drooling over (or is that just me). In my opinion however, the arrival of the Taycan signals a much larger course change for the company than anyone is really paying attention to.

Unsurprisingly, developing the Porsche EV platform has been a hugely capital intensive project. Not only did it cost over $1bn to develop the Taycan alone but Porsche has guided that it intends to spend more than $6bn on electric mobility by 2025. They have even increased their stake in the Croatian EV supercar builder and electric battery/drivetrain developer Rimac to 15%......in other words, Porsche are committed to electric and the implications of that are really twofold. Firstly, Porsche need to see a return on that investment and secondly, if successful, I would assume that they will look to deploy further capital into EV in order to maintain their competitiveness and market share.

So what’s the big deal? ....I hear you ask.

Well when Porsche were building petrol (and even diesel) powered Cayennes and Panamera’s, there were still synergies between those cars and the sports and supercars they were making. Be it fuel pumps or air filters, R&D investment in those areas would ultimately have a shared value and benefit across their entire product offering……be it a 918 Spyder or a Macan. Now however, by changing the power source, you are also ultimately changing the way you build those cars which means the cross platform synergies are diminishing.…… which in turn begs the question, why would Porsche bother to keep making their gas guzzlers?

Unfortunately crystal balls are hard to come by these days but my view is a successful attempt to penetrate the EV market (which given the initial feedback seems likely) would ultimately mean further product concentration in the area. The obvious and easy targets will be focused around Cayenne, Panamera and Macan electric models initially however an all-electric 911 won’t be far behind and then the question becomes what they will do about their higher performance sports cars range…..will the next generation GT2 RS be powered by lithium power packs rather than 98 Octane?

Whether you see the electrification of Porsche as a good or a bad thing, as a company they are extremely diligent when it comes to listening and processing customer feedback. Customers still wanted to have a manual gearbox option in their GT3s so they reintroduced one, customers didn’t like the 4 cylinder engine they used in the latest Cayman and Boxster range, so they reintroduced a 6 cylinder one. There is no reason why they wouldn’t pursue the same approach with the transition into electric.

The bottom line is it all comes down to cost. While Porsche can still justify building petrol powered sports cars, they will. That said we will reach a point in the not too distant future where those costs will begin to outweigh the benefits and the plug (ohh the irony) will ultimately be pulled on the conventional combustion cars……so better make the most of them now.

Happy Motoring,

Greg