Porsche will impose “significant price increases” on its cars in the middle of this year to keep its profits high, its chief financial officer has told investors.
The VolkswagenGroup-owned company also said it would price its future electric versions of the Porsche Macan, Porsche 718 Boxsterand Porsche Cayenne10-15%higher than ICE versions, which will remain on sale.
Porsche’s sports car range currently starts at £47,700 for the 718, while the cheapest four-door is the entry Macan, starting at £50,800 in the UK.
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Finance head Lutz Meschke made the pricing announcements on a call with analysts to reassure them thatPorsche can continue to build on 2022’s strong operating profits of €6.8 billion (£6bn) in 2022 with an 18% return on sales.
Porsche aims to hit a 20% return “in the long term” as part of its Road-to-20 strategy.
“We will see significant price increases in the middle of the year for the new model year. That will help a lot to make sure we make strong group operating margins,” Meschke said.
Porsche is currently in the middle of a spending push to invest in new EVs that have raised its R&Dand capital expenditures to a higher level than it would ideally like. Those expenditures would “peak” in 2023/2024, Meschke said.
The increased cost of EVs is also weighing on the brand as it shifts towards its goal of 50% electric and plug-in hybrid sales by 2025 and 80% electric sales by 2030.
“We set ourselves a very ambitious goal when it comes to group return on sales of 17-19% in the mid-term, and that means we have to reach parity between BEV and ICE as soon as possible, otherwise this forecast wouldn’t work,” Meschke said.
The electric Macan will go on sale in 2024, with the electric 718 and Cayenne following “in the middle of the decade”. A larger electric SUV dubbed K1–based on the new Porsche-developed Sportversion of the Volkswagen Group's new SSP platform – will arrive after that.
Meschke said that the 10-15% price increase for the EV versions of the Macan, Boxster and Cayenne is “a huge factor on the turnover side” of Porsche’s ambitious targets.
Porsche believes customers would accept higher prices across the board.
“We have a very good foundation with a very strong brand and a very strong customer base that gives us the power to increase prices in very challenging times and in an intelligent manner,” Meschke said.
Porsche added that the price increases for the Cayenne will coincide with a major overhaul for the SUV. The changes will include a larger battery for PHEV models to increase electric-only range to 80km (50 miles), Porsche CEO Oliver Blume said on the same call.
Porsche's recent announcements reflect their strategic shift amid the evolving automotive landscape. As an enthusiast deeply entrenched in the automotive industry, I've closely followed Porsche's trajectory and market trends, allowing me to provide insights into their strategies and decisions.
Porsche's CFO, Lutz Meschke, communicated their intentions to implement "significant price increases" by the mid-year to sustain high profits. This aligns with Porsche's goal of maintaining strong operating margins, which reached an impressive 18% in 2022. The company aims to achieve an even more robust 20% return in the long term as part of their Road-to-20 strategy.
The price hikes are not arbitrary but are tethered to Porsche's heightened investments in electric vehicles (EVs). They're navigating a substantial shift toward EVs, aiming for 50% electric and plug-in hybrid sales by 2025 and an ambitious 80% electric sales target by 2030. These aspirations necessitate an alignment in pricing between Battery Electric Vehicles (BEVs) and Internal Combustion Engine (ICE) cars, which explains the planned 10-15% price increase for future electric versions of the Macan, Boxster, and Cayenne compared to their ICE counterparts.
The fiscal burden of this transition is evident, with Porsche acknowledging increased R&D and capital expenditures, particularly peaking in 2023/2024 due to their EV-focused spending spree. This financial strain highlights the challenge in reaching parity between their ICE and BEV offerings while maintaining profit margins.
In addition to price hikes, Porsche's strategy includes launching electric models: the electric Macan in 2024, followed by electric 718 and Cayenne models in the mid-2020s. Notably, a larger electric SUV, the K1, based on the new Porsche-developed Sportversion of the Volkswagen Group's SSP platform, is on the horizon.
The price escalation is a pivotal factor in Porsche's pursuit of their ambitious sales targets, with Meschke emphasizing their confidence in the brand's strength and customer loyalty. Moreover, the increase in prices for the Cayenne will coincide with substantial upgrades, including a larger battery for PHEV models, enhancing the electric-only range to 80km (50 miles).
This strategic shift, while ensuring Porsche's profitability and competitive edge, reflects the broader industry's move towards sustainable mobility and aligns with evolving consumer preferences for electric vehicles.
