Porsche must invest in companies looking to solve issues such as traffic in cities rather than rely on selling cars to survive in the future, according to Porsche finance and IT boss Lutz Meschke. “Cities want to reduce traffic, therefore we have to look for solutions which fit our brand. Shared mobility is not enough – it will not bring us significant profit share,” said Meschke. “If you want to get a piece of the cake, you have to think about investments in other brands or in traffic solutions. Just to talk about Porsche cars to get the right fit for future mobility, that’s not enough. We must think about investments, starts-ups, to get profitability in other businesses. “Today our customers are willing to buy two, three, four Porsches, but in future, maybe they will buy one or two and for mobility in cities, they will use other services. We have to think about business models that can balance these potential losses.” One example is Porsche’s subscription service, already launched in a handful of cities in America. Described by Meschke as a “good starting point,” he said it supports Porsche’s business and reaches younger customers. It will launch in Asia and Europe over the next two years. However, he added, in five years it will not compensate for the reduced mobility in cities, and in turn, reduced sales. “If 60% of people will live in major cities, then car sales in those cities will be reduced significantly. With our brand, we are limited. It will be a niche and we will not earn enough money to keep the profitability level at 15% (Porsche’s margin aim) and that’s the problem. We must think about new business models, not only with our own brand but with investments.” Meschke acknowledged there would come a time when Porsche’s main revenue stream would not come from selling cars. He didn’t give a timeframe, but said: “Of course, we have to try to keep direct selling (cars) as long as
Origin: Porsche: we must diversify beyond selling cars to survive
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Chinese EV start-up boss: new premium firms won’t survive
The boss of new Chinese EV firm WM Motor believes the challenge of establishing a brand means that premium start-up firms will struggle to survive – which is why his firm will focus on the mainstream market. Originally known as Weltmeister, WM Motor was founded in 2015 and last year launched the electric EX5 SUV in the Chinese market, where it sells for between £22,000 and £34,000. The firm has long-term plans to expand internationally. Chinese regulations to encourage electric car sales have made it the world’s largest market for such cars, with a number of Chinese start-ups attempting to establish themselves. These include well-funded firms such as Nio and Xpeng, both of which are pitching themselves as premium brands to rival the likes of Tesla. But speaking at the Financial Times Future of the Car Summit in London, WM Motor boss Freeman Shen, who previously headed Volvo’s Chinese division, questioned whether a premium-focused start-up could survive. “We have aimed for the mass market, as history shows independent premium brands don’t tend to survive,” said Shen. “Look at Lincoln, Cadillac, Porsche and more – they tried, but in the end they have been absorbed. Good luck to Tesla, we’ll see. “In China, the new generation of car buyers are looking for new brands with new technology at an affordable price; that’s where we sit. The change is such that I don’t need to spend 30 years building a premium brand to then move it mainstream. The same is true in the US, where there’s not so much choice in the mainstream below Tesla.” While Shen admitted that WM Motor was “not profitable today”, he added that “we are one of the first that can be”, although he declined to give a timescale for that to
Origin: Chinese EV start-up boss: new premium firms won’t survive
Matt Prior: How to survive as a premium manufacturer
I don’t think you can read too much into the recent announcement that Infiniti, the posh arm of Nissan, is going to withdraw from sales in Europe. I once sat in a room with Carlos Ghosn, formerly the boss of RenaultNissan, where he said he didn’t care how many cars Infiniti sold in Europe, so long as the sub-brand’s profit margin was into double digits. Although apparently he’s not quite so influential now as he once was. Anyway, it turns out that double digits on naff all is still naff all. But in that ‘double digits’ figure you can see why having a posh brand was so appealing to Nissan in Europe. It also reveals how tight profit margins are if you’re not a premium car maker. The market is so cut-throat that normal car makers aspire to moderate single-digit figures, so if they have an underwhelming year, or if they find themselves behind the curve of a new trend, they can be scuppered for ages. So they all want a bit of what DS, the posh bit of Peugeot-Citroën, has been similarly explicit about. Premium bits of the car market account for 11% of all car sales, DS says, but 37% of all profits. And so DS would like to sell cars into 70% of this profit-rich environment. Which, as Infiniti has found in Europe, is a problem. How do you convince people that your car is worth spending more than average money on? The easiest way is to be German or British or Italian and to have been doing it for a century already. Then you can claim that you’re ‘the ultimate driving machine’ or ‘engineered like no other car’. Which is fine. If it’s still true. But here’s the thing: what if it isn’t? Or, at least, what if it’s true for some of your cars but very much not true for others. Because while it’s irresistible for ‘normal’ car makers to try to sell cars in the premium market, it’s similarly tempting, for makers of hitherto posh cars, to try to sell them to people who previously couldn’t afford them. So if you want to lease a Mercedes-Benz or an Audi for not much more than £200 a month, you can. Or, in other words, give up a daily latte and a Ford Fiesta, and you can probably have an Audi A1. Doing that doesn’t sound so premium at all – and if you’ve sat in an A1, it probably doesn’t feel it, either. And so Audi will keep making R8s and Mercedes will keep making G-Classes because they need to keep reminding you that, deep down, they make top-end cars, even when, quite a lot of the time, they don’t. And I suspect the world’s ordinary manufacturers will keep trying, and, quite often, failing, to find ways of pushing above that line, because they don’t make cars that command six-figure prices and whose performance or engineering we go gooey about. So we’ll never quite buy the fact that a DS is an Audi rival even if it looks different and feels better inside. But the lines between the premium and the ordinary have never been more blurred. And while there’s a lot to be gained, if you’re Infiniti or DS, by trying to step above it, if we start to see the reality for what it is, it strikes me there’s a lot to lose for premium car makers who step below the line, too, and expose the whole charade for what it
Origin: Matt Prior: How to survive as a premium manufacturer
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