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Quick takeaways
- Porsche's success is driven by their ability to create versatile sports cars that perform well in races and can be driven on regular roads.
- Porsche and Volkswagen have an intertwined relationship, with Porsche having exclusive distribution rights for Volkswagen's cars and becoming the largest car dealer network in Europe.
- Porsche's dedication to the iconic 911 model and its vision of offering used Porsches as entry-level models helped the company overcome financial hardships.
- The implementation of the Toyota production system by Vendelin Wiedeking improved Porsche's efficiency and profitability, leading to a revival of the brand.
- Porsche's expansion into the luxury sports car and SUV segments with models like the Boxster and Cayenne played a key role in the company's resurgence.
- Porsche's entry into the electric car market with the Taycan showcases the brand's commitment to embracing new technologies and driving future growth.
Deep dives
Porsche's Success in Racing and the American Market
Porsche's 356 model achieves success in racing, winning its class at Le Mans in 1951 and 1952. Porsche becomes popular in America, with 40% of their production being sold in the US. The company's success is driven by their ability to create versatile sports cars that can be driven on regular roads and perform well in races.
The Connection Between Porsche and Volkswagen
Porsche and Volkswagen have an intertwined relationship. After World War II, Porsche enters into a deal with Volkswagen where they have exclusive distribution rights for Volkswagen's cars. In return, Porsche's German company receives a royalty on every Beetle sold worldwide. The Austrian Porsche company focuses on dealership business and becomes the largest car dealer network in Europe.
The Evolution of Porsche Models and Leadership
In the 1960s, Porsche realizes the need for a new model and the 356 is replaced with a more modern design. The decision is made to focus exclusively on sports cars rather than expand into sedans. The grandsons of Ferdinand Porsche, Ferdinand Porsche and Ferdinand Piesch, join the company and contribute to its success. Ferdinand Piesch becomes known for his skills in engine design.
The Decline and Restructuring of Porsche
During the late 80s and early 90s, Porsche faced significant challenges and a decline in sales. The company released models like the 928 and 944, which struggled to compete with the rise of Japanese sports cars. Additionally, economic downturns and exchange rate fluctuations further impacted Porsche's financial situation. This led to changes in management, including the appointment of Peter Schutz as CEO, who drew a symbolic line on the wall to indicate the continuation of the iconic 911 model. However, despite these efforts, the company experienced financial hardships and sold off non-voting shares in an IPO. Porsche's resilience came from its dedication to the 911 and its vision of offering used Porsches as entry-level models.
Transition and Revival with Vendelin Wiedeking
In the early 90s, Vendelin Wiedeking joined Porsche and implemented the Toyota production system to improve efficiency and profitability. This shift was crucial in turning the company around. Wiedeking later became the CEO and made the bold decision to streamline the product line, focusing solely on the 911 model. This move involved discontinuing models like the 944 and 928. While it may have seemed risky to have only one product, Wiedeking believed in the iconic status and desirability of the 911. His strategy was summed up by saying, 'Porsche's entry-level model is a used Porsche.' This focused approach set the stage for a revival of the brand.
Expansion and Future Growth
With a more stable foundation established, Porsche was able to expand its product line and pursue future growth. The success of the 911 model provided the company with a solid platform to introduce new models like the Boxster and Cayenne. These additions diversified Porsche's offerings and catered to a larger market, particularly in the luxury sports car and SUV segments. The strategic expansion and innovative designs propelled Porsche's resurgence and solidified its position as a leading automotive brand. Today, Porsche continues to thrive and evolve, remaining true to its heritage while embracing advancements in technology and design.
The Success of Porsche Boxster
The Porsche Boxster was a huge success for the company. Its design language and shared components with the 911 gave it a genuine Porsche identity. By making it look like a 911, Porsche aimed to eliminate the perception of the entry-level model as a second-class citizen. The Boxster's success also came from the strategic decision to share many components within the Porsche brand, contributing to production and operational efficiencies.
Porsche's Exploration of SUVs
Porsche's entry into the SUV market with the Cayenne was initially met with skepticism. However, the Cayenne's success demonstrated the viability of luxury SUVs. Porsche's decision to create an SUV that combined both on-road and off-road capabilities helped legitimize the brand's ability to cater to different market segments. The move into SUVs also generated significant profits and led to the expansion of Porsche's customer base.
Porsche's Embrace of Electric Cars
Porsche's foray into electric cars is exemplified by the introduction of the Taycan. Despite initial reservations, the Taycan has been well-received, offering powerful performance and a driving experience reminiscent of traditional Porsche sports cars. The Taycan demonstrates Porsche's commitment to embracing new technologies and paving the way for a future that includes electric vehicles. This move, along with the success of its SUVs, has played a key role in Porsche's continued growth and financial performance.
Porsche's ability to maintain brand perception
Porsche has managed to maintain a high level of brand perception, even as they have increased their production and expanded their model lineup. While other luxury car brands like BMW and Mercedes Benz have seen their brand perception diminish with increased scale, Porsche has been able to preserve the elevated status of their brand. Despite producing a significant number of SUVs, Porsche still holds a special place in the minds of enthusiasts and continues to be seen as a prestigious brand.
Profitability and defensibility of Porsche
Porsche's profitability has been strong within the automotive industry, with gross margins of 29% and solid operating margins. The brand's defensibility is evident in its enduring heritage, customer loyalty, and ability to capture premium pricing. The strong brand perception, coupled with the company's commitment to quality and engineering, sets Porsche apart from other luxury car manufacturers. Although challenges may arise, Porsche's deep-rooted reputation and fan base make it highly defensible in the market.
29.
The Bifurcation Between Anyone Can Do It and What the Very Best of the World Look Like
2min
Nobody’s perfect — including Porsche. Despite that phrase appearing in their famous 1983 magazine advertisement, they managed to get damn-close to the perfect luxury business (even Bernard Arnault would be jealous!). Porsche is both quality AND quantity, owning the most prestigious brand in its market, while at the same time churning out almost half a million mass-market soccer mom/dad SUVs per year. And like any good luxury brand, it’s packed with enough juicy family drama and creeping takeovers to fill a Netflix series.
Yet, behind it all lies perhaps the darkest origin story we’ve ever told on Acquired. Not only was Porsche was started by Nazis, Adolf Hitler himself was deeply involved in its early fortunes. And, following WWII, the Allies simply looked past these facts and essentially bestowed a license to generate wealth on Porsche and its owners — setting the stage for them to become one of the top ~15 wealthiest families in the world today.
Joining us to explore it all is perhaps the very most-qualified person in the person in the world: the one & only Doug DeMuro. Not only is Doug the largest independent car reviewer on YouTube with millions of subscribers (we’re HUGE fans), he previously worked at Porsche corporate and owns a legendary Porsche Carrera GT — which served as the recording backdrop for this episode. Make sure you tune in to watch the video version! :)
ACQ2 Show + LP Program:
Links:
- Doug’s YouTube channel (which we HIGHLY recommend)
- Cars & Bids
- Episode sources
Carve Outs:
Sponsors:
ServiceNow: https://bit.ly/acquiredsn
Statsig: https://bit.ly/acquiredstatsig24
Vanta: https://bit.ly/acquiredvanta
Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.
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