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EDITORIAL
Audi and Porsche, for its Volkswagen parent, are the icing on the cake

AID Newsletter Editorial 1322 from Peter Schmidt - December 04th 2013


Porsche Maccan 2013 LA Auto Show Matthias Mueller CEO

Open quote signPorsche is by almost any criterion the most successful car company of its time. Germanyís Volkswagen Group, unlike many of its volume car rivals, and after bringing illustrious Porsche AG under its corporate umbrella, is probably laughing all the way to the bank. Justified? Yes

Not only does it own Audi, still the most profitable of Germanyís three leading prestige carmakers, and already top dog in Chinaís budding prestige car market where this year alone Audiís sales are on course to balloon to a likely 480,000 on the way to zooming to some 700,000 sales by 2018, Volkswagen also controls Porsche AG. 

It stands out with a recent growth record more usually associated with high-tech electronic age companies. But despite its Icarus-type climb towards the sun, Porsche has not crashed back down to earth in flames. 

Instead, after nearly tripling its sales since 2002, when judged on current form, it is well on the way of breaching the 200,000 threshold in little more than two or possibly three years from now. 

Thatís from a carmaker that between 1992 and 1995 - Porscheís absolute low-point - built less than 20,000 cars a year. 

Three quarters through this difficult year, with some volume car makers ending up in therapy, Audiís much envied operating margin had eased back only gently to 10.1 per cent. 

And that excludes the brandís profits from China, which for the VW Group reached a much elevated Ä3.53bn during the 9-months to October this year. 

None of that is featured in declared operating profits, although, a fair chunk of Audiís declared profits owe much to China, thanks to its flourishing sales of built-up models like the Q7 and LWB A8 luxury car. 

But Audiís profit margins still pale next to Porscheís. 

Its operating profits for the nine months to September this year reached close on Ä1.9bn. 

Thatís an operating margin of 18.2 per cent for the nine months to September and 17.6 per cent for the third quarter. 

By comparison, that compares with third quarter margins of 10.1 per cent for Audi, 7.3 per cent for the Mercedes car brand and 9 per cent for BMWís car business. 

For illustrious Porsche, whose global sales have nearly tripled since 2002, thanks almost entirely to the roaring success of its Cayenne SUV, which Porsche developed in close co-operation with itís then VW partner. 

Last year, its Cayenne alone was responsible for more than half the 149,767 cars built by Porsche that year. 

Thatís 83,200 units of which close on 20,000 were sold in China. 

No doubt, given the huge economy of scale benefits, thanks to the realisation that last yearís production of Cayenneís same DNA brothers like the Audi Q7 and VW Touareg reached a respective 54,600 and 77,600, it goes without saying that all that is echoed in handsome profit margins. 

Porsche AG, since finding itself roped into the Volkswagen stable, has evidently decided to rely even more heavily on the goose that laid the golden eggs. 

Its newly unveiled Macan, effectively a Porsche version of Audiís already hugely successful Q5 SUV-Crossover, and just like its larger Cayenne brother, is virtually guaranteed to turn into yet another big money-spinner for Porsche. 

Put into perspective, last year Audi built and sold close on 210,000 Q5s, of which almost 93,000 were snapped up by Audiís car buying public in China. 

Buoyed by the same tried and tested cost-savings formula from its money-raking Cayenne, with its new Q5 based Macan, Porsche has again been handed yet another licence to print money.

No doubt, given that Porsche, conservative even at the best of times with its forecasts, says it plans to sell some 50,000 Macans annually, the addition of yet another SUV-Crossover into the worldís fastest expanding segment, is bound to work wonders for Porscheís future profitability. 

To an extent, the implied scale benefits to the tune of an incremental 50,000 Q5-Macan Crossovers from Porsche, will also benefit its Audi stable-mate, thanks to a conceivable 300,000pa production of Q5 family SUV-Crossovers. 

The net effect will be even lower unit costs, potentially catapulting both Audiís and Porscheís future margins to what ranks in the automotive industry as hitherto unreached stratospheric heights.
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