How rampant up-selling by dealers underpins Porsche's staggering bottom-line performance
Porsche is famously known as the world’s most profitable car company, but recent figures released by the company show exactly how profitable: in the first three months of this year it made £13,061 for every car it sold. By contrast, BMW makes about £3,500, according to the Economist.
VW must be very happy. Porsche sales of 37,000 were just two per cent of the overall VW group’s total for those three months, but it made an amazing quarter of the profit, netting 573m euros (£484m).
Porsche was in big trouble back in the 90s
So how on earth does it make so much cash?
First we approached Porsche in the UK, the brand’s fourth biggest market. But despite starting with an easy underarm question – ‘what is the secret to your profitability?’ – we got nothing back. Fair enough, a girl wants to keep a few secrets to herself.
So we spoke to PHers who’d recently bought a new Porsche.
Of course the company hasn’t always had it this good. “In the middle of the 1990s Porsche was in a threatening crisis,” head of sales Bernhard Maier told an industry conference that PistonHeads attended last year. “The products no longer fitted to the customer demands. The production and other areas of the company were inefficient,” he said.
Cayenne aided the return to profitability
The next bit you know. Porsche broadened its range with the Boxster in 1996, followed by the ballsier Cayenne SUV in 2002. The company learnt how to build less wastefully with help from the masters: Toyota. As Maier put it, “Storage racks were cut down with motor saws and every process was checked.” Instead of having components and panels lying around, everything was now built when the customer ordered the car.
It all went pear-shaped in 2007-2009, when the company got infected by the same financial madness as the banking industry and tried to swallow the VW Group whole. But despite losing its independence to VW in the whole messy process, the fundamentals were still there and between 1994 and 2011 Porsche increased its turnover from 1bn euros to 10bn.
But the sports car market is famously tough – passion among enthusiasts isn’t always translated into sales, as any Lotus thread on here will tell you.
OPCs are one of many "touch points"
Unless you’ve bought or serviced a car at an Official Porsche Centre (OPC) you won’t know how hard the company has worked on cajoling its customers into parting with their cash. Like the Kraken’s tentacles, Porsche’s “customer touch points” are hard to escape for potential buyers or existing customers. Sales boss Maier boasted that Porsche had 120 of these contact points, ranging from going into a service to receiving a customer magazine. “Our customers should be handled so smoothly that they don’t even feel a process,” he said.
PHer David Taylor from York experienced this first hand. “I used to have a secondhand 996 GT3 and about 30 months ago I was cold-called by my local Porsche dealer to see if I wanted to buy a very nearly new 997.2 GT3 RS,” he tells us.
Understandably he baulked at the cost. “This was a very big jump financially from a £40K 996 and having pondered long and hard I decided to say no.”
Customer service is "seamless" in here
But Porsche didn’t give up. “A couple of weeks later I got another cold call asking if I would be interested in ordering a new one as a build slot had come free. The combination of scarcity and the earlier price conditioning led me to saying yes in about two seconds.”
In the showroom, the headlong rush towards the dotted line is even harder to resist. PHer and first time Porsche buyer Jim Gabriel discovered this when he bought his 991Carrera in February. “From the receptionist to salesman to business manager it all appeared seamless; they all remembered who I was, what I drove, and what I do for a living.” His car was in stock and ever-present. “I was impressed that when you were knee-deep in negotiation, the car, that object of desire, was parked just in my eyeline.”
Jim’s 991 came pre-specced, but he admired the “well-judged” test route for highlighting the attractions of certain options. “When the sports exhaust needed a demo we were in a village, surrounded by high walls which perfectly amplified the sound,” Jim tells us. David, meanwhile, specced his new GT3 to £122,000 from a base price of £106,000.
"Well-judged" test route helps matters, too
You’re not even safe after the handshake. The Porsche Experience Centre at Silverstone has its own option showroom area where buyers who’ve put a deposit on a new car and have claimed their free half-day thrash-about can add any extras they realised they should have specced, following the morning’s drive in the well-optioned demo cars.
Other “touch points” Porsche owners will be familiar with include the OPC writing to them asking whether they want to trade in their old car for a new model, ostensibly because they’re short on used stock.
Keeping it up
Of course, you’re not going to come to the brand if your new car plummets in value, and Porsche’s impressive residuals are achieved partly because of the exclusivity, building “one car fewer than the market is able to handle” according to Maier.
"Upgrade, sir?" It's hard to resist...
But that exclusivity could be threatened by the current push to sell 200,000 cars a year globally by 2018.
Last year Porsche hit sales of 141,000, a huge jump from 119,000 in 2011. Of those, 8,000 were in the UK, up from 6,400 the year before. Next year’s smaller Macan SUV will almost certainly bridge the remaining gap, and it could outsell the Cayenne, now Porsche’s best-selling car globally and in the UK.
Whatever you think of that car and Porsche’s SUV strategy it doesn’t seem to have harmed the brand appeal. That’s what brings buyers into the showroom, where the real pressure is applied to spend more than they really ought. Says PHer Jim, “I could bang on about the experience for hours, but I would sum it up as ‘slick’.”