Automaker CEOs have warned for years about the impact of a costly EV switch on their margins. But ahead of its landmark potential listing, Porsche is telling investors it can become more profitable by focusing on battery power.
he Volkswagen-owned sports car maker sees more potential to raise the prices of its electric vehicles than its internal combustion engine models, CFO Lutz Meschke said during Porsche’s Capital Markets Day earlier this week.
He expects the manufacturer’s EV margins to catch up with ICEs in two years and then increase as customers are willing to pay more for new technology.
The sports car maker – which is planning an IPO in the fourth quarter – has set out to increase its return on sales to over 20 percent over the long term, up from 16 percent last year. Management projects that by the end of this decade, eight out of every 10 Porsches sold will be electric, and that electric vehicles will account for half of the luxury car market by 2031.
“Our goal is to selectively expand higher-margin segments and to take advantage of price opportunities for electric vehicles,” said Porsche CEO Oliver Blume.
Porsche is pursuing its IPO at a time when the state of the industry is anything but normal. Automakers generate high returns because supply chain shocks limit production and leave them little choice but to focus on their most lucrative models and raise prices.
It’s unclear what will happen once shipments stabilize, but recent quarters’ premium profitability will make comparisons difficult later on.
Porsche is way ahead of rivals like Ferrari and Aston Martin when it comes to electrifying its offering. But while its Taycan EV outperformed the iconic 911 last year, the automaker still produces far fewer electric vehicles than Tesla.
A more meaningful EV ramp-up will require overhauling factories, reskilling workers and securing increasingly scarce raw materials for batteries.
Alongside the uncertainty of what profitability will look like once supply chain crises subside, production normalizes and automakers start serious EV transitions, it is also unclear what will happen to pricing power once EVs are no longer the hottest are new things.
Older automakers haven’t been very transparent about how profitable their early battery-powered models are.
One exception is Volvo, which was lauded by Bernstein analysts this week for its level of disclosure.
The company’s electric vehicles — which were 12 percent more expensive than its internal combustion engine cars — posted a gross margin of 15 percent in the second quarter, down from 21 percent for its internal combustion engines.
On a positive note, Volvo’s EV margins improved by one percentage point from the first quarter.
https://www.independent.ie/business/world/porsche-pitches-battery-technology-as-margin-booster-41858946.html Porsche presents battery technology as a margin enhancer