Mainstream car manufacturers are busily eschewing claims about speed, power and acceleration and elbowing each other aside in the race to appear green.
Not Porsche.
Mainstream manufacturers are nervously eyeing the bottom line and wondering where they can axe production or fire a few more workers. Some are slashing prices, desperate to unload marginal products in stagnant or saturated markets.
Not Porsche.
The German maker of luxury sports cars and a gas-guzzling SUV seems to have a counter-intuitive business plan, and it is working.
Porsche sales have doubled to about 100,000 a year in the last 6 years and are likely to double again by 2012, according to investment banker Morgan Stanley. Porsche plans to introduce new models which go faster and gulp down more gasoline on the way, although hybrid power will soon be available to at least give an appearance of environmental consideration.
Automotive consultancy CSM Worldwide is less optimistic, but still expects Porsche to expand sales to 150,000 a year by 2013. Professor Ferdinand Dudenhoeffer, managing director of automotive consultants B&D Forecast of Bochum, Germany, thinks that long term, Porsche could sell up to 500,000 vehicles a year, as it uses the resources of Volkswagen to leverage down its research and development costs, and relies on VW to produce components and parts hidden under the skin of its luxury products
Porsche now controls VW, Europe's biggest car manufacturer, after raising its stake to 31 percent earlier this year.
New Panamera sedan
Morgan Stanley believes that Porsche's accelerating profile will be led by new products like the Panamera, coupled with a drive into new markets like Russia, China and India while traditional markets like the U.S. progress more slowly.
The Panamera, a four door sports sedan about the size of a BMW 5-series, is expected to hit dealerships in 2009. This will be followed by a baby-Cayenne SUV in 2010, and a coupe based on the Panamera in 2011, according to Morgan Stanley. The smaller Cayenne would be derived from the Audi Q5 (Audi is owned by VW). The current Cayenne SUV also shares much engineering with the VW Touareg and Audi Q7.
The investment banker reckons the Panamera should sell about 30,000 a year, and the "baby" Cayenne will ultimately add up to 50,000 a year.
"We expect Porsche to introduce a smaller variant of the Panamera which most magazines have so far referred to as a resurrected '928'", Morgan Stanley's Adam Jonas said.
This is addition to Porsche's traditional 911, Boxster and Cayman two-seaters.
"Porsche will be able to bring each new model to market through the enormous resources of its Volkswagen 'subsidiary.' The Panamera will have the painted body shells made in VW's Hanover plant with final assembly in Leipzig. We expect the sub-Cayenne to share significant content and manufacturing with the Audi Q5 and VW Tiguan. The 'new 928' should be assembled alongside the Panamera in Leipzig," Jonas said.
Mandatory CO2 rules
A major cloud hanging over Porsche, and other small, specialized sports car makers like Ferrari, Maserati, Aston Martin and Bentley, has been the European Union's threat to introduce a mandatory limit on fuel consumption, along the lines of the U.S. Corporate Average Fuel Economy rules.
This would require an average fleet output of 130 grammes per kilometer (g/km) of Carbon Dioxide (CO2) by 2012, the equivalent of about 43 miles per U.S. gallon, although the details of how this would be implemented have yet to be disclosed. European car manufacturers are unhappy about this and say the proposed standard is too much and too early and should be delayed until 2015.
At a technology conference in Berlin in early June sponsored by Toyota of Japan, Dr Marianne Klingbeil, from the European Commission's Environment Directorate, said she believed this delay was not justified and wouldn't be allowed, but also said the Commission, the E.U.'s executive branch, wanted "diversity" in the car market and "choice" for consumers and wouldn't seek a blanket average of 130 g/km which would distort the market.
CSM Worldwide's British-based Europe Sales Forecast Manager, Walt Madeira, doesn't expect the new CO2 rules, whatever they are, to be a problem for the likes of Porsche.
Commission sources said that the new CO2 rules would be designed to allow specialist manufacturers like Porsche to thrive. Porsche would be expected to demonstrate an annual improvement in CO2 emissions, but not forced down to levels which would threaten its existence.
Madeira didn't think more onerous CO2 rules would make much difference ultimately.
Customers don't have a green agenda
"Any tax burden or fines (for exceeding CO2 rules) will ultimately be passed down to the customer and with these high end products they won't be too worried. People buying these vehicles don't have green on their agenda; for every Leonardo DiCaprio, hundreds of others want to buy these cars," said Madeira.
DiCaprio and other Hollywood stars are often seen at movie premieres getting out of hybrids like the Toyota Prius.
Madeira expects a Cayenne hybrid, with an engine provided by VW, will help to soften Porsche's image, particularly in the U.S.
Madeira's forecast, although positive for Porsche, is significantly below Jonas's of Morgan Stanley. Madeira is not convinced that Porsche will actually make a "baby" Cayenne, or a coupe Panamera.
"If Porsche launched this (small Cayenne) it would create a lot of competition with VW-Audi, which would rather have the Audi Q5 targeting competitive products like the BMW X3, and Mercedes' compact SUV. Because of the possible internal conflict I don't think it would be worth launching that model (the baby-Cayenne version of the Audi Q5)," said Madeira.
Even though B&D Forecast's Dudenhoeffer has high hopes for Porsche's long term sales and profits - he reckons average net profit margins are about $27,000 - he also points to weaknesses in the strategy which he calls "badge engineering" because of the reliance on VW componentry and engineering.
Dudenhoeffer says the planned new models and higher volume will lead to a loss of exclusivity which will ultimately mean shorter product cycles and lower profit margins.
New markets replace North America
Morgan Stanley's Jonas has no such doubts, with sales being led by new markets which will replace traditional leading markets like North America.
"Porsche will be less and less dependent on the U.S. market which used to account for half of the revenues. Now the U.S. accounts for one third and by 2011, 2012 will account for one quarter of revenues. It is less and less dependent on the U.S. consumer with every month that goes by. Porsche is opening a new dealer every week and none in the U.S. It's Russia, China and India, even Mongolia," said Jonas.
"In 2006, we estimate Porsche sold more cars in the city of Newcastle (northeast England) than it did in India. Porsche opened up its first Indian dealer in New Delhi last year and will have five dealers up and running by the end of 2007. Similar expansions are taking place in China, Russia, the Middle East and Latin America," said Morgan Stanley.
Emerging market sales will double to 30 percent of the total by 2011, from nearly 15 percent now.
Exotic sports cars
In a report in April, Morgan Stanley noted the huge sales growth at Ferrari - up 26 percent in the first quarter, with profit tripled compared with the previous year. In the report called "Massive Ferrari Growth a Read-Across to Porsche", Morgan said weak traditional markets don't reflect the future for exotic sports car makers.
"We believe the market is paying too much attention to U.S. and European registration data and ignoring the super-normal growth of ultra-premium brand sales to the incremental millionaire (or billionaire) in the emerging wealth regions, particularly in Russia, East and Central Europe, Asian and Middle East," Jonas said from his office in London.
Porsche, shrugging off green concerns, drives to new highs
