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Porsche profits may decrease

Jan 11 2013 16:22 Reuters

The Porsche Carrera 4?GTS is the epitome of every gearhead’s wildest dreams. Picture: Brent Ellis

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Berlin - Porsche's pursuit of record profits could suffer a setback this year as it contends with sluggish demand in Europe and higher spending on plant expansion and dealerships.

"Unbroken demand in China and the United States, where the Volkswagen-owned car maker uses the Detroit auto show next week to flaunt the new Turbo S version of its best-selling Cayenne model, barely compensates for weakening business in Europe", says Porsche CEO Matthias Mueller.

"The situation in Europe is as critical as ever," Mueller said in an interview.

"It's unclear whether Porsche's core market, where it sells more than a third of its vehicles and makes its highest profits on models such as the €90 417 ($119 500), will ever return to levels seen before the 2008 credit crunch," he added.

"We have to make up for those missing profit contributions from Europe,"

Porsche is betting on its next model, the Macan compact sport-utility vehicle (SUV), to boost sales from 2014. It is also adding a dealership a month in China to tap "enormous demand" in its second-biggest market and is building a new US headquarters in Atlanta. 

Operating profit in 2012 is expected to have exceeded 2011's record €2.05bn, and Mueller says the goal is to at least match that this year.

However, results will be burdened by the €500m cost of expanding the Cayenne-making plant in Leipzig, increasing the development facility near Stuttgart and renovating Porsche's main factory in Zuffenhausen, where two-seater sports cars are assembled.

Record deliveries

"Restraint among car buyers in Europe, where Porsche recorded about 50 000 of its record 140 000 global deliveries last year, will slow the sales gain in 2013 to less than the almost 18% achieved in 2012," the CEO said.

"Premium manufacturers feel this (European crisis) just as much as the big volume makers." 

The demand-sapping euro zone crisis has sent that market to its lowest in almost two decades and research company IHS Automotive forecasts that it will shrink a further 10.8% this year to 13.2m vehicles.

Conversely, sales in China are expected to increase 16.5% to 20.5m, while the U.S. market may expand 18% to 15.1m vehicles, IHS Automotive said on Thursday.

Benefiting from integration into the multi-brand VW group, Porsche may be able to increase global sales to 200,000 vehicles earlier than its 2018 target and expand to seven model lines from five.

Additions could include a smaller version of the four-door Panamera coupe and a supercar to fill the gap between the 911 GT2 RS (€237 600) and the 918 Spyder hybrid (€768 000).

Porsche is building only 918 of its costliest vehicle, the 918 Spyder, which is designed to compete with supercars from Fiat's Ferrari division and McLaren.

It has already sold more than half and Mueller expects the remainder to be sold by about the end of the year, when the 500-horsepower vehicle will be delivered to customers.

"Business may be getting tougher for Porsche, but they're not standing idly by," said Stefan Bratzel, head of the Center of Automotive Management think tank.

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