VW Though Will Gain Most From Any Porsche Progress
Porsche’s ambitious sales plans look achievable, although most of the profit benefit will accrue to Volkswagen.
According to Commerzbank auto analyst Daniel Schwarz, Porsche’s plan to double sales by 2018 sounds ambitious but is achievable.
Porsche announced in July that it believes it can sell at least 200,000 vehicles by 2018, at least double the current annual rate.
Meanwhile, in the first half of 2011 Porsche, owned 50 per cent by the Porsche Automobil Holding SE and Volkswagen, raised its operating profit to €1.07 billion from €675 million in the same period of 2011, boosted by improved demand in China and a better performing U.S. market. The operating profit margin was 15.4 per cent for the last figures, and Porsche said it expects record sales in 2011 of more than 100,000.
“Porsche aims to achieve this (more than 200,000 by 2018) by launching three new models – the Cajun, a small SUV, Pajun a small Panamera, and a 551 Spyder, a new entry level Porsche below the Boxster,” said Schwarz.
This implies a potential dilution of the brand.
“However, VW’s scale effects and globally dense sales network allows leveraging the Porsche brand significantly, more than compensating for a potential loss in exclusivity. Accordingly, Porsche car owners might need to watch out for their residual values, but Porsche/VW shareholders should benefit,” Schwarz said.
Control, if not overall ownership by VW is a win/win, according to Schwarz.
“Porsche develops the modular tool kit for sports cars within VW group and can pass on fixed costs to Audi, Lamborghini etc. Porsche’s ability to go into more niches of the market underlines the strengths of VW’s modular strategy, resulting in reduced one-off expenditures for new models (some 20 per cent savings, according to VW) and reduced unit costs (another 20 per cent, according to VW),” Schwarz said.
The complicated nature of the deal between VW and Porsche, which started out with the latter trying to buy the former, then the former trying to buy the latter, ended in the current roughly 50-50 stalemate. According to Deutsche Bank, Porsche SE shares will only indirectly benefit from overall profits because they only own one third of VW’s capital.
“However, the (VW’s) decision to buy Porsche AG was the right one and the price paid (€7.8 billion) for a 20 per cent EBIT margin business ended up being on the cheaper side given strong profit rebound,” said Deutsche Bank analyst Jochen Gehrke.
But the plan remains for Porsche to be VW’s 10th brand whatever the outcome of VW’s attempt to buy all of the company, which remain separate until tax and legal issues can be resolved.
Neil Winton – September 5, 2011