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Porsche Earned $19,000 Per Car in 2014

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Porsche AG recorded almost $19,000 in operating profit for every vehicle it sold in 2014.

The company announced last week that it recorded an operating profit of 2.7 billion euros in 2014, marking a new record for the company but a lower per-unit figure than the previous year.

On average before interest and taxes, the company earned about 14,220 euros per vehicle, or almost $18,900 based on the average exchange rate between the euro and greenback in 2014. That represents a 16.4 percent decrease in average profit per unit compared to 2012 when a global survey by the CAR Center at Duisburg-Essen University said that Porsche AG was the most profitable automaker in the world.

But IHS Automotive analyst Stephanie Brinley says that isn’t an indication of anything negative at the company. Quite the opposite. To date, the company sells seven models in the U.S. where it did 24.7 percent of its business in 2014. Currently the company sells 21 different variations of the 911 sports car or a total of 51 derivative models based on those seven nameplates.

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Utility Vehicles Key to Increased Revenue

“In 2014, Porsche sold more Cayenne SUVs than 911s and Panameras combined, and the Macan (pictured) became its second-best-selling vehicle,” she said. “Even if the Macan brings in less profit per vehicle than the 911, Porsche will sell at least twice as many Macans as 911s next year and possibly generate more profit on the Macan than the 911, due to the higher volume. The company is generating far more revenue—profitably—than with a smaller product lineup.”

918 Spyder Sold Out Last Year

Aside from the Macan compact crossover, which starts at $53,595 but can climb above $100,000 in its more potent “Turbo” guise, the company was also selling its 918 Spyder halo car in 2014. The order book for that car closed late last year after Porsche found customers for each of its planned 918 units.

“Whether the car was profitable, I can’t say. However, given future emissions and fuel economy requirements, Porsche needs to understand and be able to execute on alternative powertrains in a way that is true to the brand DNA and what customers expect,” Brinley said. “Making money on the 918 was less important than the statement it made regarding the potential for hybrid technology to be at the heart of fantastic performance, and what the company learned about applying hybrid technology.”

2015-porsche-918-spyderPorsche and other brands with similar levels of exclusivity need to be mindful of the possibility that rapid expansions in volume can potentially dilute their brand image.

Risks of Rapid Growth

“It is possible to grow too much, too fast and dilute the brand and cut corners on product development,” Brinley said. “So far, Porsche seems to have avoided that trap. While expansion to at least one more product line seems imminent, the company has been cautious on adding new product lines.”

During the company’s annual investor meeting, CEO Matthias Müller spoke of “promising plans” for a seventh model by 2020. Rumors of Porsche developing a rival to the Tesla Model S have been circulating for months, but R&D boss Wolfgang Hatz denied reports that the company is working on such a product.

Porsche reserved the name “718” with the U.S. Patent and Trademark Office last February. So far, there hasn’t been any official indication from the company about plans to use that nameplate specifically on an upcoming car.

“For mass market products, volume is where the profits come in, as higher volume can drive down cost,” said Brinley. “Adding variants to the Porsche business comes at the cost of somewhat lower brand exclusivity and increased engineering costs. Expanding the range, however, is a strong lever for increasing volume for the brand overall — and, in the case of SUVs — required to keep up with consumer demand and remain industry relevant.”

Most recently Porsche unveiled its new 911 GT3 RS during the Geneva Motor Show alongside the new Cayman GT4, two especially performance focused and exclusive models.