Turnover is vanity, profit is sanity and going motor racing is insanity-or is it?
Porsche cars are revered worldwide. For over 70 years, the German manufacturer has built a reputation for producing high performance vehicles, which are engineered to last. Since 2017, Porsche AG has become the world’s most profitable car company. On release of the company’s 2018 financial results, the statistics must have stimulated intense envy from other manufacturers in their sector.
In 2018, Porsche AG delivered 16.6% operational return, 25.8 billion euros in turnover and a juicy operating profit of 4.3 billion euros. Compare this to competitor Jaguar Land Rover (JLR) and the contrast is stark. Despite growth in volumes of their iconic Range Rover and new SUV models, the Coventry based firm reported an annual operating loss of £3.3 billion despite selling twice the number of cars of Porsche. Ouch.
Porsche and JLR fight for the attention of the same customers. Fashionable sports utility vehicles (SUV) make up the core of both company’s product ranges. Porsche produces three SUV models; the enormous Cayenne, semi-compact Macan and now even a Cayenne coupe, stretching the SUV niche within a niche to the limit.
JLR produces four different variants of its Range Rover model and two variants of the Discovery model. If that’s not enough, prospective Land Rover customers can now order a revived modern era Defender. Available in long or short wheelbase, of course.
For sports cars, JLR pin their hope on the elegant F Type sports car to take on the Porsche 911, the bestselling sports car of all time. Jaguar’s F-Type is an old school, loud and slightly unhinged car in range topping SVR form. Porsche’s equivalent, the 911 Turbo, will devour any given road at mind bending speed yet with typical Germanic efficiency.
Porsche AG sell less than half as many units as JLR. Yet, Porsche AG fortunes are the polar opposite of the struggling Coventry based firm.
Sitting comfortably in the Volkswagen group, enjoying shared components, undoubtedly gives Porsche a competitive advantage over rivals.
Porsche’s brand image is built on foundations of performance, durability and desirability. Since the genesis of the company with the 356, motorsport has been intertwined with the company’s culture and brand perception. Throughout the company’s history, Porsche has consistently campaigned vehicles in global motorsport that directly link to their road car range. Each iteration of 911, with its engine uniquely mounted at the rear of the car, has always been accompanied by a reassuringly familiar GT racing car. The infinitely desirable 911 GT3RS road car, with its wailing flat 6 motor, was originally born and bred as a ‘homologation special’ from the equivalent GT3 racing car.
Porsche’s current road car strategy is unwaveringly pushing towards electric powertrains. Recent profits have been consistently reinvested into this technology. In 2018, Porsche’s largest hike in volumes, surprisingly, came from the previously unloved Panamera model. Sales of the luxury saloon climbed by 38%, delivering Panameras to 38,443 happy new owners. In Europe, over 60% of Panamera’s sold, were plug in hybrid models.
In 2019, Porsche will begin deliveries of the Taycan, Porsche’s first electric car. 1500 new employees have been added to the companies 32,000 strong workforce, just for the development and manufacturer of the Taycan.
Although Porsche’s flat out pursuit towards electric innovation is now becoming a reality, the marketing efforts promoting the technology, have been operational for years.
In 2014, Porsche returned to the world’s most famous race, The 24 Hours of Le Mans. Following a 15-year hiatus from the top category of competition at Le Mans, the Weissach factory were lured back by the embrace of hybrid powertrains. Entry presented Porsche with two key opportunities. Firstly, to promote the virtues of hybrid power to loyal customers and dealers by winning the 24 hours of Le Mans. Secondly, to develop the hybrid and electric technology through the accelerated development gained from participating in motorsport.
Porsche’s Le Mans programme has long been a kernel of the company’s marketing strategy, or perhaps more accurately, Porsche marketing has followed their unrivalled success at Le Mans. 19 outright victories and countless other class wins in the 24-hour epic, have solidified Porsche’s reputation for high performance vehicles built to the highest standard of durability.
In the marketing of luxury goods, endorsements and associations with famous people and places carry enormous prestige. In the automotive industry, triumphs at Daytona, Le Mans, Sebring, Targa Florio and Monte Carlo, are gold for promotional material. Porsche has won them all.
Whilst every other car manufacturer has dabbled with sporadic forays into motorsport, Porsche’s unique commitment to motorsport has constructed the pillars of their brand image.
Cleverly, Porsche has co-ordinated its vast global reach in motorsport, by spreading the logistical and financial strain with ‘customer’ teams around the globe. Focus on this customer led business model has been constant throughout Porsche’s history. Arguably, Porsche’s most famous race car, the 956, was so customer friendly that it was delivered with a key to fire up its twin turbo, flat 6 power plant.
Today, customer teams can purchase a 911RSR or 911 GT3R car to compete around the globe. If worthy, customer teams may receive technical support from Porsche’s world class engineers. If such support is granted, Porsche may also dispatch one of their crack team of factory drivers, to assist the customer team in their pursuit of victory.
For a professional racing driver, the invite to become a Porsche factory driver is a career changing moment. It’s the motorsport equivalent of joining the Red Arrows. Only the best of the best are chosen to join the ranks of Porsche Motorsport. Of course, high performing athletes partaking in a dangerous pursuit, have lofty salary expectations but are a wise investment in Porsche’s motorsport activity. Porsche factory drivers are the definition of professionalism and therefore asking what this salary expectation might be is both offensive and futile. However, with a free choice of company car from the Porsche fleet, I suspect they are well looked after.
In return, Porsche’s elite pilots are expected to relentlessly travel worldwide, without complaint. Assisting Porsche customer teams in winning races and in turn, developing the Porsche brand reputation further, they are the ultimate iteration of a customer service assistant.
Only a limited amount of Porsche’s racing activity will be operated and paid for by Porsche themselves. High profile assaults on the Le Mans 24hr, Daytona 24hr, World Endurance Championship, IMSA championship and Formula E championship will be operated and funded directly by Porsche themselves. Although, this equates for only a small part of their motor racing activity. Porsche’s loyal customers spend millions of euros, racing cars purchased from the factory and deliver a key aspect of Porsche’s marketing strategy for good measure.
Marketable benefit from motorsport is impossible to accurately measure, however it can be determined that Porsche’s motorsport activity is certainly efficient. What other business could say that their customers (the race teams) are conducting a global marketing campaign (winning prestigious races) on their behalf?
To most manufacturers, motor racing may seem wasteful and inefficient. However, I suspect the world’s most profitable car company will keep their secret to success for a little while longer.