Porsche News
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The high-end luxury vehicle brands Porsche and Bentley form the most profitable division for Volkswagen AG. While adjusted EBITDA margins for the overall company stood at 14% in 2013, according to our estimates, margins for the Porsche, Bentley division stood at nearly 40%. Although Porsche and Bentley constituted only 1.5% of the net volumes, these high-end luxury brands form almost 18% of Volkswagen's valuation, by our estimates, due to higher average revenues and fatter margins.
Going forward, Volkswagen's profits could rise on the back of anticipated growth in high-end luxury vehicle volumes, owing to rising wealth and deeper penetration in developing markets. In the second quarter as well, operating margins expanded 12.5% due to higher profits for the luxury brands Audi, Porsche and Bentley, despite a 32.5% fall in operating profits for the namesake passenger cars lineup.
Porsche To Expand Production Outside Of Germany
Super-luxury vehicle brands such as Porsche, Bentley, Ferrari, Maserati and Rolls-Royce tend to resist expanding production operations outside their native countries to protect their exclusive premium brand image and perception of superior engineering and architecture. Porsche's manufacturing is also centered in Germany, in Stuttgart-Zuffenhausen and Leipzig, which produces almost two-thirds of all Porsche volumes.
However, the new generation model of the Cayenne sports utility vehicle, to be launched after 2016, will be produced completely at Volkswagen's plant in Bratislava, Slovakia. This plant already manufactures the bodywork and other components for the Cayenne, but the assembly of the model takes place at the production plant in Leipzig.
In addition to the advantage of lower labor costs in Central Europe, shifting production of the Cayenne in Slovakia could also streamline operations and draw synergy benefits, as the plant there already produces large SUV models Audi Q7 and the Touareg. Owing to low labor costs and other cost-benefits associated with production in the Slovakia plant, Porsche's profitability is expected to improve in the long term.
High Demand For Porsche Prompts Increased Investments
In 2013, Porsche spent around 1.6 billion euros (around $2.13 billion) on research and development, also including development of cleaner technologies. The company plans to spend around 700 million euros on its Stuttgart-Zuffenhausen site, which began production of the 918 Spyder super sports car in 2014. In addition, Porsche has spent around 500 million euros to expand operations at its Leipzig plant, where production of the compact crossover Macan began early this year.
Increased production is in line with the rising demand for Porsche, which witnessed an 8% year-over-year rise in volumes to 87,803 units in the first half of the year. With increasing population of affluent customers, Porsche's sales could further grow. Global high net worth individual wealth is expected to grow at a CAGR of 6.5% to $55.8 trillion by 2015. As these customers form the target base for premium vehicles, sales and consequently market share for Porsche could increase.
Porsche And Bentley Contribute Most To Volkswagen's Operating Profits
Owing to the high demand for Porsche's high-end luxury offerings, revenues for the division rose by 16% through June to 8.2 billion euros. However, operating margins contracted from 18.3% last year to 17%, as higher volumes and favorable product mix was slightly offset by increased spending on research on development. Porsche expects to continue investing in technology building and cleaner engineering, which is why operating margins could fall to around 15% this year.
But this is still more than the 10% return on sales for Volkswagen's other luxury vehicle division Audi, and the small 2.1% return on sales for Volkswagen's own brand of passenger vehicles, reported through June. Owing to the higher prices for Porsche, compared to both Audi and Volkswagen's passenger vehicles, each vehicle contributes higher to the group's net profits. If Porsche's average revenues increase by 3% this year, and assuming that operating margins don't fall below 16%, Volkswagen could make around $20,200 on each sale of a Porsche vehicle.
On the other hand, Bentley had operating margins of 10.7% in the first half of the year. If average revenue per unit for Bentley also rises 3% and margins remain relatively stable, Volkswagen could make just over $22,000 per sale of a Bentley vehicle. With growth in both Porsche and Bentley volumes, the company's overall profits will also rise. The Porsche, Bentley division formed 22% of Volkswagen's net adjusted EBITDA last year.
Going forward, Volkswagen's profits could rise on the back of anticipated growth in high-end luxury vehicle volumes, owing to rising wealth and deeper penetration in developing markets. In the second quarter as well, operating margins expanded 12.5% due to higher profits for the luxury brands Audi, Porsche and Bentley, despite a 32.5% fall in operating profits for the namesake passenger cars lineup.
Porsche To Expand Production Outside Of Germany
Super-luxury vehicle brands such as Porsche, Bentley, Ferrari, Maserati and Rolls-Royce tend to resist expanding production operations outside their native countries to protect their exclusive premium brand image and perception of superior engineering and architecture. Porsche's manufacturing is also centered in Germany, in Stuttgart-Zuffenhausen and Leipzig, which produces almost two-thirds of all Porsche volumes.
However, the new generation model of the Cayenne sports utility vehicle, to be launched after 2016, will be produced completely at Volkswagen's plant in Bratislava, Slovakia. This plant already manufactures the bodywork and other components for the Cayenne, but the assembly of the model takes place at the production plant in Leipzig.
In addition to the advantage of lower labor costs in Central Europe, shifting production of the Cayenne in Slovakia could also streamline operations and draw synergy benefits, as the plant there already produces large SUV models Audi Q7 and the Touareg. Owing to low labor costs and other cost-benefits associated with production in the Slovakia plant, Porsche's profitability is expected to improve in the long term.
High Demand For Porsche Prompts Increased Investments
In 2013, Porsche spent around 1.6 billion euros (around $2.13 billion) on research and development, also including development of cleaner technologies. The company plans to spend around 700 million euros on its Stuttgart-Zuffenhausen site, which began production of the 918 Spyder super sports car in 2014. In addition, Porsche has spent around 500 million euros to expand operations at its Leipzig plant, where production of the compact crossover Macan began early this year.
Increased production is in line with the rising demand for Porsche, which witnessed an 8% year-over-year rise in volumes to 87,803 units in the first half of the year. With increasing population of affluent customers, Porsche's sales could further grow. Global high net worth individual wealth is expected to grow at a CAGR of 6.5% to $55.8 trillion by 2015. As these customers form the target base for premium vehicles, sales and consequently market share for Porsche could increase.
Porsche And Bentley Contribute Most To Volkswagen's Operating Profits
Owing to the high demand for Porsche's high-end luxury offerings, revenues for the division rose by 16% through June to 8.2 billion euros. However, operating margins contracted from 18.3% last year to 17%, as higher volumes and favorable product mix was slightly offset by increased spending on research on development. Porsche expects to continue investing in technology building and cleaner engineering, which is why operating margins could fall to around 15% this year.
But this is still more than the 10% return on sales for Volkswagen's other luxury vehicle division Audi, and the small 2.1% return on sales for Volkswagen's own brand of passenger vehicles, reported through June. Owing to the higher prices for Porsche, compared to both Audi and Volkswagen's passenger vehicles, each vehicle contributes higher to the group's net profits. If Porsche's average revenues increase by 3% this year, and assuming that operating margins don't fall below 16%, Volkswagen could make around $20,200 on each sale of a Porsche vehicle.
On the other hand, Bentley had operating margins of 10.7% in the first half of the year. If average revenue per unit for Bentley also rises 3% and margins remain relatively stable, Volkswagen could make just over $22,000 per sale of a Bentley vehicle. With growth in both Porsche and Bentley volumes, the company's overall profits will also rise. The Porsche, Bentley division formed 22% of Volkswagen's net adjusted EBITDA last year.
