Image source: Porsche official
Porsche, which has never worried about making money, now has the trouble of making money.
On July 24, Porsche announced its first-half financial results. Judging from the performance of the financial report data, Porsche had an uncomfortable first half of the year, and it can be said that it has encountered the biggest challenge in recent years.
revenue was 19.46 billion euros, down 4.8% year-on-year; operating profit was 3.06 billion euros, a decrease of 800 million euros (about 6.3 billion yuan) from 3.86 billion euros last year, a year-on-year decrease of 20.5%; Operating margin was 15.7 percent, down 3.2 percentage points from the same period last year, gross profit decreased by 11.9 percent to 5,206 million euros, and gross margin was 26.8 percent, down 2.1 percentage points from the previous year.
In response to the fact that the earnings report was clearly lower than the assumption at the beginning of the year, Porsche urgently lowered its full-year forecast, from the forecast of 40 billion to 42 billion euros to 39 billion to 40 billion euros, while the operating margin was also lowered from the forecast of 15 to 17 percent to 14 percent to 15 percent.
In addition, as a radical in the transition to electrification, Porsche has repeatedly emphasized that the proportion of electric vehicles in sales will reach 80% by 2030, but now the tone is beginning to loosen. While Porsche still believes that the share of all-electric models in sales could reach 80 per cent by then, it stresses that this is no longer a concrete target. The reason is that the transition to electrification has been much slower than expected, and the market demand has not been satisfactory.
Image source: Screenshot from Porsche's financial report
Porsche's downgrade of its full-year outlook and its acknowledgment of the difficulties in the transition to electrification have also been responded to by the capital markets. On the same day that the full-year earnings forecast was lowered, Porsche's share price fell 7.7 percent, the biggest intraday decline in the two years since it landed in the capital market. Porsche's share price has fallen by more than 36 percent over the past year, and its latest market value has fallen to 31.5 billion euros, a far cry from the more than 70 billion euros it had when it first went public two years ago.
Porsche mentioned the word China many times in the earnings briefing, so how much does this short-than-expected half-year financial report have to do with the Chinese market?
Weak demand in the Chinese market
The first reason for Porsche's decline in the first half of the year was the decline in global sales. From January to June, Porsche delivered 155,945 new vehicles to customers worldwide, down 7 percent year-on-year. Porsche attributed the decline in global deliveries to two factors: the impact of the transition period for model changes and weak demand in China.
The impact on the Chinese market has been the most severe.
The Chinese market has been the largest single market for Porsche in the world for eight consecutive years, accounting for more than 30% of Porsche's total global sales. However, with the decline of the Chinese market, Porsche's continuous growth was also forced to press the pause button.
In the first half of this year, Porsche delivered only 29,551 new cars in the Chinese market, a decrease of more than 14,000 units or 33% compared to the same period last year, and its share of total sales fell to 19%, sliding to the third largest market in the world, and the Chinese market is also the single market with the largest decline in the world. The reason for Porsche's conclusion is that the continued tight economic environment and the company's focus on value-based sales are implicated by involution.
In addition to the Chinese market, Porsche's performance in other markets around the world has actually been stable and rising. Europe (excluding Germany) and North America tied for Porsche's largest single market in the first half of the year, accounting for 25% of Porsche's sales, of which the European market excluding Germany grew by 6% with 38,611 deliveries. In North America, 39,558 vehicles were delivered, down 6 percent.
Porsche attributed the decline in the North American market to the delay in the delivery of some models due to customs reasons in the first quarter, but the North American market caught up in the second quarter and achieved its strongest quarterly results. In addition, in the Germany market, Porsche sold 20,811 vehicles in the first half of the year, a year-on-year increase of 22%. Deliveries of new vehicles overseas and emerging markets totaled 27,414 units, down 2% year-on-year.
Proportion of Porsche's sales in major markets around the world in the first half of the year
It is conceivable that if the Chinese market continues to grow, Porsche's half-year earnings report will be exceptionally impressive. But the wave of electrification in the Chinese market and the involution dominated by price wars began to affect the interests of the ultra-luxury automaker in China.
Porsche's first all-electric sports car, the Taycan, delivered only 8,838 units in the first half of the year, a 51 percent year-on-year decline. As a result, the share of BEVs in Porsche's total sales has dropped from 10.5 percent in the first half of 2023 to 5.7 percent in the first half of this year. This made Porsche, which had previously made a drastic transition to electrification, shake his heart.
Lutz · Meschke, Chief Financial Officer at Porsche, commented: "With the global transition to electrification at a very different pace, we have begun to recalibrate and reprioritize projects and products based on internal combustion engine technology. "The strategy is characterised by the need to maintain maximum flexibility in the production of different powertrains. Porsche will continue to focus on three powertrains: battery electric vehicles, plug-in hybrids and internal combustion engine vehicles. ”
The implication is that in the future, Porsche will provide customers with three types of power models: pure electric, plug-in hybrid and internal combustion engine, and as for which model to promote, it will be decided by market demand, and no specific targets will be set for the transition to electrification. This move can be regarded as stronger than Porsche, which has also chosen to "lie flat" in promoting electrification.
High-value fuel vehicles continue to "soar"
The reason why Porsche dares to choose to "lie flat" in the matter of electrification is mainly because high-priced gasoline vehicles can still contribute to a steady stream of profits. According to the financial report, although the overall car sales revenue declined, the average sales revenue per vehicle increased, from 113,000 euros in the same period last year to 167,400 euros. This shows that there are still a lot of people who are paying for Porsche's high premiums.
This can be seen in the respective sales of Porsche's six models.
Porsche attributed the decline in global sales in the first half of the year to product replacement. In the first half of 2024, Porsche launched its largest ever model offensive, including the third-generation Panamera, the mid-facelift all-electric sports car Taycan, the hybrid 911 and the all-electric Macan for the first time. Five of the six model series have been replaced. The launch of these new models has had a significant impact on sales, inventory and development costs.
However, in terms of actual impact, in addition to the big drop in the all-electric Taycan, even if the price of other models has increased, it has achieved enough sales to satisfy Porsche.
Specifically, among the six major models sold by Porsche in the first half of the year, except for the Taycan, a pure electric model, all the others are fuel models. Among them, the Cayenne Cayenne, which starts at 948,000 units in the Chinese market, has taken on the role of sales pillar, contributing nearly 55,000 units to global sales in the first half of the year, up 16% year-on-year.
In the first half of this year, global sales of the Macan, which was the mainstay of last year's sales, fell by 18% to 39,000 units. However, the Macan is priced much lower than the Cayenne, starting at 578,000 yuan in the Chinese market, which is almost 400,000 yuan lower than the Cayenne. This also reflects the popularity of Porsche's high-value combustion engine vehicles.
In the first half of the year, Porsche's models sold their respective sales, source: screenshot from Porsche's financial report
In addition, sales of the 911 and 718 sports cars increased by 8% in the first half of the year, but the luxury sedan Panamera sold just over 13,000 units in the first half of the year, a sharp decline of 25%, which is only lower than the all-electric Taycan, which fell by 51%.
It can be found that the three models that saw a decline in sales in the first half of the year were all new-generation models, including the Panamera, Macan, and Taycan, two of which were pure electric models. Detlev von Platen, who is responsible for Porsche's global sales and marketing business, vowed to say: "In 2024, we will bring to market the strongest Porsche portfolio ever. ”
But what is clear is that it is still unclear whether Porsche's move will work in the complex Chinese market.
What about the Chinese market?
Just four days before the announcement of the half-year financial report, Porsche officially announced the new CEO of the Chinese market. This is the latest response to the "forced palace" incident of dealers at the end of May 2024 and the continuous decline in sales in the Chinese market.
The new CEO ·is Alexander Pollich, 57, who has been with Porsche for 23 years and will leave Shanghai on September 1 to take up the important position of President and CEO of Porsche China, Hong Kong and Macau.
Polić was previously Chairman of the Executive Board of Porsche Germany GmbH and was responsible for the development of the domestic market in Germany. It has been in the Germany market for 6 years. In the first half of this year, Porsche's sales in Germany increased by 22 percent, making it the largest single market.
Prior to that, Polic successfully expanded Porsche's business in Canada and the United Kingdom, where he served as CEO. Polich, a bachelor of business administration and economics graduate, is recognized within Porsche as an experienced and proven sales expert.
Source: Screenshot from Porsche's financial report
It can be seen that Polich, who is good at sales, is regarded by Porsche as the captain of the fire to turn the Chinese market around. As Detlev von Platen, Member of the Executive Board of Sales & Marketing at Porsche, wishes Polic on his new role: "The Chinese market is extremely challenging at the moment. Polich will further enhance the attractiveness of the Porsche brand in China. ”
It is reported that Polich's first task in China is to develop a value-oriented and brand-appropriate growth strategy for the Chinese market. The implication is that Porsche still has to rely on the brand halo to sell cars in China, and there must be no more phenomena such as sacrificing profits to sell cars.
In their speeches, Porsche's executives also emphasized that Porsche's sales strategy has always been "value over sales". Porsche hopes that Polic's arrival in China will bring this strategy back to the forefront. Another focus of Polić's work is to strengthen relationships with local distributors and further optimize internal processes and structures.
But the problem is that under the wave of electrification and the frenzied impact of price wars, the brand value of traditional luxury brands such as Porsche has been impacted. Under such circumstances, how can Polich, who came with a mission, "prescribe the right medicine" for the Chinese market? There is no doubt that Porsche's market performance in China in the second half of the year will provide the answer.
(This article was first published in Titanium Media App, author|Wang Ruihao, editor|Zhang Min)