For the past years, CEOs in the auto industry have been warning that the transition to electric vehicles would have an impact on their profit margins due to high costs, according to foreign media reports. Porsche, however, told investors before the IPO that it could make higher profits with electric cars.
Porsche Chief Financial Officer Lutz Meschke said at the Capital Markets Day earlier this week that the company sees higher price increase potential for its electric cars than for internal combustion engine models. He believes Porsche’s electric car margins will reach the same level as internal combustion models within two years and will continue to improve after that, as consumers are willing to pay more money for the new technology.
Porsche, which plans an IPO in the fourth quarter of this year, has a new plan to grow its return on sales to more than 20 percent in the long term, up from 16 percent last year. The company’s management expects electric models to account for 80 percent of its total sales by 2030; by 2031, electric cars will account for half of all sales in the luxury car market. Porsche CEO Oliver Blume said, “Our goal is to selectively expand in higher-margin segments and to take advantage of pricing opportunities for electric vehicles.”
Photo credit: Porsche
When it comes to electrification, Porsche is way ahead of competitors like Ferrari and Aston Martin. However, even though its Taycan all-electric model outsold the iconic 911 sports car last year, the company is still producing far fewer electric cars than Tesla. The company will need to revamp its factories and retrain employees, as well as secure an increasingly scarce supply of raw battery materials if it hopes to significantly ramp up its electric car production.
The 911, Porsche’s most profitable model, is currently only available in an internal combustion engine version, and the company is preparing to launch an electric version of the Macan SUV, which could cost more than the $60,000 gas-powered version. The company also plans to introduce a new electric luxury SUV that will be positioned above the Cayenne and will start at more than $83,000.
According to Blume, Porsche is unique because the brand has a luxury appeal and benefits from economies of scale, having sold 27 times more cars than Ferrari last year. Yet despite this, maintaining high volumes during the electrification shift while boosting margins will be a considerable challenge.
