Hammer911

Is Porsche Still a Sports Car Maker?
As SUVs Outsell Speedsters, Luxury Brand Hopes Le Mans Will Keep Flame Alive

By VANESSA FUHRMANS

LEIPZIG, Germany—As Porsche maneuvers deeper into the markets for SUVs and sedans, it is racing to remind a new generation of drivers what gave the brand its original mystique—speed.


The brand has unnerved purists in recent years, first with the launch of its hulking Cayenne sport-utility vehicle, then a four-door sedan called the Panamera. Though the expansion has boosted the Volkswagen AG-owned car maker's sales by nearly 50% over the past four years, the Cayenne and Panamera made up roughly three-quarters of its 143,000 vehicle sales last year.

Next year, Porsche takes yet another big step from its sports-car roots with a new compact SUV. Chief Executive Matthias Müller says it could add up to 75,000 to its annual sales—further eclipsing Porsche's legendary 911, Boxster roadster and its hard-topped sibling, the Cayman. The company also is weighing developing a smaller version of the Panamera.

"If the sports cars get drowned out, they risk killing the golden goose," says Mark Ritson, an associate professor of marketing at the University of Melbourne's business school who has consulted for luxury brands. A happy Cayenne owner, Mr. Ritson counts himself as one of the thousands of decidedly nonsports-car drivers Porsche has lured with its model expansion. But the powerful SUV "is so far from a [911] Carrera, it is unbelievable," he adds. "It is a big, fat people-mover."

Porsche is turning to measures unusual for a car maker known for its minimalist marketing efforts to keep that adrenaline-pumping connection alive. It is returning to the 24 hours of Le Mans race next year and building "experience" centers in Shanghai, Atlanta and Los Angeles aimed at cultivating sports-car aficionados with on- and off-road test tracks and driving courses. It also has stepped up Porsche roadshow events.

"I'm convinced we have to do something to keep our brand image high, and these kinds of measures are helping do that," said Mr. Müller in a recent interview at the company's Stuttgart headquarters.

A longtime veteran of German luxury-car maker Audi and its parent Volkswagen, which completed a protracted takeover of Porsche last year, Mr. Muller has implemented many of the moves since becoming CEO in late 2010.

Porsche's efforts underscore the tricky balancing act niche car makers face in leveraging their brands to fuel growth and finance ever-costlier technologies without diluting them in the process. Even as it pushes toward a target of 200,000 cars in annual sales by 2018, every Porsche that rolls off the company's German assembly lines is custom-built to each buyer's wishes, down to the stitching of its leather interior.

The hefty premium its customers pay for that cachet has translated into some of the best profitability in the auto business. In 2012, Porsche's operating profit climbed 19% to €2.44 billion ($3.14 billion), a 17.6% return on its €13.9 billion in revenue. In contrast, operating margin at Daimler AG's Mercedes-Benz car business last year was 7.1%, and it was 5.2% at General Motors Co .

On a recent drizzle-filled morning in Leipzig, where Porsche already runs on- and off-road test track and offers driving courses, sports car novices and aficionados alike got a taste of the racing and handling prowess the auto maker's lithe speed demons are known for. Half a dozen Porsche 911s zipped around the slippery Formula 1-grade test track, as some of the company's 300 racing instructors worldwide rode shotgun and coached their student drivers through the hairpin curves at top speeds.

"Ok, so that's what this car can really do," said Stephen Smith, a Canadian hotel owner who'd travelled to Porsche's Leipzig track to test his sports-car driving mettle and pick up a custom ordered 911. As he pulled in for a pit stop, he let out a big breath of air and laughed: "It's definitely a great marketing tool." More than 30,000 Porsche drivers and would-be customers took part in such driving events last year, and the brand expects to woo even more with the new centers in China and the U.S.

Porsche's speedy rise in China has made its efforts all the more challenging. Within a decade, China has become the German car maker's second-biggest market behind the U.S., thanks to the Cayenne's runaway success. Yet barely 7% of its sales there are for its sporty two-seaters.

Many wealthy Chinese prefer being chauffeured and riding in a plush back seat. Though more Chinese—especially the affluent young—are getting behind the wheel themselves, the country's sports-car culture is still in its infant stages, held back in part by its often poor roads and congested city traffic.

In response, Porsche is directing much of its sports-car profile-raising efforts there. Its Shanghai experience center, which opens early next year, is being built next to the city's nine-year-old Formula One racing circuit to draw on its crowds. In addition to sponsoring driving schools and roadshows, it also is organizing a growing number of professional and Porsche customer races around the country.

Ultimately, says Porsche's Mr. Müller, he hopes one-third of Porsche's annual Chinese sales will be sports cars, but cultivating a generation of Chinese enthusiasts for its small, high-powered speedsters "won't happen overnight."

Still, such moves can go only so far, some Porsche sports car enthusiasts say. "Today a Porsche customer is much more likely to be a soccer mom driving a Cayenne who has no understanding of what the 911 is or was, and the people who believe in the Porsche mystique—they are fewer and fewer," said Peter De Lorenzo, a former automotive advertising executive and Porsche owner who publishes the blog Autoextremist.com.

He calls the company's efforts to court both factions of customers "a delicate balancing act." But at some point, he adds, "Porsche and its [Volkswagen] overlords are going to have to make a conscious choice between more volume and profit and retaining the essence of the brand."

Mr. Müller says growing sales and profit from its nontraditional lineup are what allows it to invest in new, ever-costlier sports-car innovations—and models.

So does close cooperation with Volkswagen. Even before the takeover, the Cayenne shared the same underpinnings as VW's Touareg and is partially built at the same Slovakian plant. The coming Macan SUV will share the same platform as Audi's Q5 SUV. The car makers originally estimated they could save some €700 million annually in costs by further integration. Mr. Müller said potential savings now are more likely to reach €1 billion. "We've had about 400 working projects together," he said.

Case in point for the business model, he says, is Porsche's new 918 Spyder, an $845,000 plug-in hybrid supercar that goes into production in September. Only 918 of the limited-series cars will be produced, and more than half have already been ordered. Its technologies—such as a hybrid power-delivery system that can rocket the car to top speeds of 211 miles an hour—eventually will find their way into the 911 and other models. In another nod to Porsche purists, it also plans to build a more powerful and lightweight version of its Cayman, called the GT3, he said.

"As long as we're successful in satisfying both the purists and those who want a comfortable but sporty car they can take shopping or to the bakery," he said, "then I think we'll be fine."

Dr.Bill

Sort of. I mean somewhere among all the SUV's and big sedans they do still make the Cayman and Boxster. . .

chuckbdc

Good article. For perspective, consider there was a time not so long ago when the title could have been, "Is Porsche Really an Industrial Design Firm?

fbroen

Also not so long ago the question could have been asked "Is Porsche really a hedge fund?"

kosmo

meh, we all know this. What i wanna know is whats this:

"In another nod to Porsche purists, it also plans to build a more powerful and lightweight version of its Cayman, called the GT3" ????

LonnieR

If it wasn't for Porsche's diversification with the other "non sporty" models, the future of the 911 model would have been in question. Especially in regard to the R&D that has occurred with the 9 series.

stealthboy

Everyone says that Porsche wouldn't have been able to continue building anything if they hadn't introduced the Cayenne. While this may be true, it doesn't mean I have to like the Cayenne. As long as the 911 is still around, I think I'm OK. But as soon as the Porsche Minivan comes along, then I might be done with the company as a whole.

I guess we should all be happy the 911 wasn't killed decades ago when it was about to be dropped in favor of the 928 and 944. I'm thankful for Peter Schutz. I guess I can take a Cayenne being built these days... because it could be a lot worse.

Hammer911

i suspect this is nothing more than journalistic inaccuracy.

chuckbdc

I wonder if the next WSJ headline will ask how Audi can possibly build sports cars given the relative numbers of luxury sedans, large and small SUVs, R8s and TTs it sells. No way it can be competitive at LeMans, Daytona, Sebring, etc., right?

chuckbdc

Did you keep your G body 911 when you got the matching 991? Perfect pair.

TTCarrera

The Boxster in 1996 saved Porsche. The 964 in 1988 that replaced the 14 year old G Series was not a financial, nor critical, success and Porsche was in dire straights. The 993 in 1993 was an improvement, but the 986 Boxster's development and sales success allowed Porsche to share development costs for the 996 and lower production unit costs.

It's also not a coincidence that computerization and CAD/CAM in the mid/late 90's (both for design and manufacturing) simultaneously enhanced the design engineering and production quality.

stealthboy

Yes, I own both! They match quite nicely .

kosmo

ah man. I woke up when i read that. Could P actually drop a gt3 engine in the Cayman?! I'll keep dreaming.

JohnnyBahamas

kosmo

lest not forgot the upcoming Macan or whatever the ugly thing will be called. The one car i speculate will be a flop for Porsche.