Can Your Company Be Like Porsche?
It is really quite remarkable that a comparatively small company can do so exceedingly well in the global auto market. Porsche seems, in effect, to be defying economic gravity. To be sure, that it is part of the massive Volkswagen Group must be an advantage in scale and financing. But anyone who has driven a Porsche and then any of the other models on offer by other companies within the Volkswagen Group (although I should hasten to point out that I haven’t driven a Lamborghini, SEAT or Skoda, though I suspect that the first-named would be the only one with potential resonance) gets the sense that Porsche is special, so there are probably a lot of agitated meetings regarding things like parts sharing.
Porsche performance numbers for 2018 on a global basis are impressive. The Stuttgart-based company delivered 265,255 vehicles in 2018, a four percent increase over 2017 deliveries. Not a huge increase, but growth. Notably, it had growth essentially around the world—up three percent in the U.S. to 57,202 units; up 12 percent in China to 80,108 vehicles—except in its own backyard. It was down three percent in Germany (27,541 total sales) and down four in the rest of Europe (77,216). Yet in the Americas (including South) it was up four percent (to 70,461) and in the Asia Pacific, Africa, Middle East market—its single biggest—it was up 10 percent (108,578).
Again, if you look at the 265,255 total vehicles, it isn’t all that big. But the difference between Porsche and practically any other OEM you can think of is this: Its operating profit grew approximately four percent over 2017, reaching €4.3 billion, and its sales revenue increased by 10 percent to €25.8 billion. Operating return on sales? An impressive 16.6 percent.
And while in the U.S. reports of job eliminations are becoming more common, in 2018 Porsche increased its workforce by about nine percent, to 32,325. According to Oliver Blume, chairman of the Executive Board of Porsche AG, “Since 2012, our workforce has more than doubled. And electro-mobility is another job engine: we are creating 1,500 new jobs for the Taycan alone.”
And while on that subject, it is worth pointing out that between now and 2023 Porsche is investing approximately €15 billion in new products, of which a high percentage are going to be fully electric like the Taycan, or a hybrid: the company plans for 50 percent of its sales to be electrified by 2025.
So let’s get to the question posed in the headline: Can Your Company Be Like Porsche?
I’m not just referring to companies that make vehicles, but any company, be it a supplier of brackets or software or services or anything else.
If we roll back the clock to 2002 you may recall that Porsche, much to the utter dismay of many, launched the Cayenne, an SUV. The argument against it was that a Porsche is a 911, not a hulking utility vehicle, familial resemblance in the front clip notwithstanding. No doubt there had been more than a few people in Stuttgart who had similar concerns. After all, a company that was known purely for sports cars was going to a place that didn’t seem necessarily germane. I can still recall a friend who’d worked at Road & Track at the time being dismissive of the term “SUV” for the vehicles that were then on the market saying, “There’s nothing sporty about these vehicles.”
Yet Porsche pulled it off by engineering a product that still had the type of performance—ride, handling, acceleration—that its customers had long associated with the brand. And the Cayenne, now in its third generation, has been a strong contributor to the success of the company: in 2018 its sales were up 12 percent, to 71,458 units, or about 27 percent of the company’s total sales.
The Cayenne is the precise example of the Porsche approach. Porsche people know what they are good at and what they’re known for. They know what they must deliver. They know that they are in a highly competitive market and that every sports car/vehicle manufacturer on Earth, established or start-up, wants a piece of their market. They know that while their customers may be in upper-income brackets, they must be competitive in their pricing lest those customers go elsewhere.
They take those factors into account, and then they execute, and when they execute it is in the service of creating products that are worthy of being a Porsche.
Another example: the forthcoming Taycan. It started out as the Mission E, which was unveiled at the 2015 Frankfurt Motor Show. Porsche, like other producers of vehicles of all types, saw that Tesla was doing remarkably well with the Model S. The size of the pie for vehicles $75,000 and higher wasn’t exactly getting bigger, which meant that Tesla was gaining sales at the expense of the incumbents. The Taycan, as it is now known, will be launching in the fall, about four years after it was revealed. Odds are that Porsche could have gotten something out faster. But it knows what it is and what is expected of it.
How many companies can say that about themselves? And that’s the difference between being like Porsche or being like any other company.
I'm not talking about a plastic Revell model of a '57 Chevy, but a real vehicle, one that rolls off an assembly line in 1999 with another 99,999 just like it right behind. Is it possible, or is this just a fantasy of the marketing department at Elmer's?
Once the playground of exotic car makers, the definition of a niche vehicle has expanded to include image vehicles for mainstream OEMs, and specialist models produced on high-volume platforms.
Dan Nicholson is vice president of General Motors Global Propulsion Systems, the organization that had been “GM Powertrain” for 24 years.