Porsche ‘planning €6bn efficiency drive to turbocharge profits’
PORSCHE has an ambitious plan to improve operating profit by €6bn over eight years by streamlining operations as it spends more to develop and manufacture electric cars, according to people with knowledge of the matter.
Porsche aims to increase earnings before interest and taxes by about €750m annually over a time frame starting this year and running through 2025 by increasing efficiencies, cutting costs and boosting contribution from new business such as digital offerings, said the people, who asked not to be identified because the discussions are private. The increase is necessary to maintain the Volkswagen brand’s target of a 15pc return on sales. Porsche declined to comment.
Keeping Porsche returns flowing is key to VW’s plan to make the world’s largest carmaker more agile and face the shift to self-driving and electric cars head on. Carmakers readying electric lineups are pushing for savings elsewhere to offset lower profits from battery-powered cars when compared to vehicles with combustion engines.
Take Porsche’s first electric offering as an example of the quandary facing carmakers. Cars like the four-door Taycan, which comes to market next year, will cost from €6,000 to €10,000 more to produce than a comparable traditional model.
Those costs won’t be passed on to customers, meaning spending reductions need to be made elsewhere to maintain profitability.
In total, the sports-car maker is investing more than €6bn through 2022 on electric mobility. After 2025, it anticipates that the efficiency push will improve profit by about €2bn annually, the people said. VW’s most profitable brand generated €4.1bn in operating profit and €23.5bn in revenue last year. The operating margin of more than 17pc compares to single-digit return on sales at most mass-market carmakers. VW’s preferred stock pared earlier losses on the news and traded 0.6pc lower at €151 as of 2.10pm in Frankfurt.