Porsche Plans To Cut Costs To Account For Lower Profitability Of EVs

NOV 26 2018 BY MARK KANE 5

Porsche looks for an additional €6 billions in savings

According to Bloomberg, Porsche is working on a plan to improve overall efficiency of the company to compensate for the lower profitability of new electric models.

The idea is to improve operating profit by €6 billion (about $6.8 billion) over eight years by 2025, which is about €750 million annually on average. Savings are expected in:

  • streamlining operations
  • increasing efficiencies
  • cutting costs
  • boost contribution from new business such as digital offerings

High profitability of Porsche is very important not only for the brand in its transitional period from ICE to EVs, but in general for Volkswagen Group (Porsche is the most profitable brand in the group), especially since Volkswagen recently struggles with falling sales.

According to the article, the all-electric Porsche Taycan will cost from €6,000 to €10,000 euro more to produce than a comparable conventional model, but the German manufacturer will not increase the price because of that, which means that the margin will be lower.

After 2025 Porsche hopes to increase efficiency and savings to €2 billion annually when half of car sales will be electrified. For comparison, Porsche noted €23.5 billion of revenues in 2017 and operating profit of €4.1 billion at operating margin of 17%.

Source: Bloomberg

Categories: Porsche

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5 Comments on "Porsche Plans To Cut Costs To Account For Lower Profitability Of EVs"

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Another Euro point of view

All car makers seem to have this concern as regards production of EVs. Either it accelerates fast and is cool (Tesla) and people are obviously ok to pay a premium or it is not cool and not very fast (Bolt, Nissan, Kona) and people will expect to pay the price they pay for ICE. Maybe a couple Ks EUR more but not much more. Is it cheaper to run ? OK but it seems to depreciate more and has overall a lot less practicality for any travel outside of city. Bottom line the price of EVs should be more or less on par with ICE or remain at a bag of peanuts level as regards market share (anything below 5%).

Do Not Read Between The Lines

I wonder why they’re depreciating. It’s almost like the 5, 16/16.5, 24/30, 22/33 kWh cars are old and have better newer versions available.

If Taycan really is offered at Model S prices as has been suggested by Porsche I can see how it would not be Porsche’s most profitable model as between the Porsche interior, the 800V power system and the more complex body (if it ends up looking like the concept car) it would offer impressive value for the same sort of money. Makes one wonder why Porsche doesn’t ask higher prices than Tesla (still assuming that it won’t…), it’s almost as if Porsche expects to be offering less (subjective) added value in the EV market than it did in the ICE market maybe because performance/quality/user experience differences just aren’t that big between high-end EVs.

Based on Porsche history, expect a greatly decontented base model and very expensive option prices for things most take for granted.

Porsche said that they want to increase their profitability to finance the EV investments and expected initially a lower return during the launch of new products (which is almost always the case, EV or not). Nobody said anything about long term low profitability of EVs. Maybe the headline should be reconsidered (it’s rather a misinterpretation).