A place to discuss all things ADM
11-10-2022, 11:49 AM
#2911
I will take some bait here, and why or why not to increase production. One, simply making more cars doesn’t just increase margin there’s always a cost component to that increase just to list a few. Facility cost as they can’t keep up with the current supply, dealers are still lacking basic parts for repair, supplier cost has increased, labor rates are sky high, Germany heavily unionized, energy cost. In Europe you can’t just fire employees, and when the economy takes a turn just fire everyone because of reduced demand not in the EU. Look at peloton during the pandemic, and all the tech companies that hired up to the demand and now they’re stuck with all the people …….time to lay off.
Porsche can be happy with their strong margins, and just watch the movie because the risk is building more widgets by adding cost. Many still forget 2008, 2010, 2020 inventory sat yes GT cars at MSRP were all over once the bubbles burst. The C-Suite job is to maximize margin, and simply increasing revenue adds unit cost which may or may not be accretive to margin. Love reading 10k’s where the company says revenue is up 10% YoY, but margin is flat. I use to be the guy telling the revenue story ….easy to spin cost and say revenue is up. Porsche can squeeze the golden goose more to satisfy bubble demand to risk being the top brand and margin marker in the business?? They have high customer satisfaction, and product demand …….the best tool in this environment is to raise the price of the widget to see what sticks zero cost to price increases vs adding risky cost. It’s ok for people to scream to build more, just raise the prices to reduce the screams.
Porsche can be happy with their strong margins, and just watch the movie because the risk is building more widgets by adding cost. Many still forget 2008, 2010, 2020 inventory sat yes GT cars at MSRP were all over once the bubbles burst. The C-Suite job is to maximize margin, and simply increasing revenue adds unit cost which may or may not be accretive to margin. Love reading 10k’s where the company says revenue is up 10% YoY, but margin is flat. I use to be the guy telling the revenue story ….easy to spin cost and say revenue is up. Porsche can squeeze the golden goose more to satisfy bubble demand to risk being the top brand and margin marker in the business?? They have high customer satisfaction, and product demand …….the best tool in this environment is to raise the price of the widget to see what sticks zero cost to price increases vs adding risky cost. It’s ok for people to scream to build more, just raise the prices to reduce the screams.
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11-10-2022, 11:58 AM
#2912
It seems counterintuitive to me too, but let's assume that Porsche wants to sell a steady, or steadily increasing, volume of cars each year, with prices increasing incrementally each year (with price increases at least matching the average trend of inflation), and maintaining their high profit margins. That would mean that they shouldn't greatly increase prices in a given year, because that would set the prices higher for subsequent years, which could be a problem if the economy weakens and demand for the cars falls. They also shouldn't make a lot more cars to meet a temporarily high demand, because those cars will remain in service for at least a decade, so supplying too many cars during a period will result in a drop in demand (less cars made and sold) in a subsequent period, and being able to easily get a car during a low-demand period will also hurt the image of exclusivity.
If this is Porsche's long view strategy, I do think that prices are currently in a bubble, which will burst as the economy cools and stimulus money gets used up, resulting in demand for these cars dropping, people who overpaid for them and are no longer enamored with them wanting to dump them before prices fall further, new car prices returning to little or no ADM, and used car prices dropping to below MSRP. But this could all take a year or more to unfold. FWIW, I've been tracking used car prices lately, and I do see dealers doing some pretty big price drops to try to move the cars.
If this is Porsche's long view strategy, I do think that prices are currently in a bubble, which will burst as the economy cools and stimulus money gets used up, resulting in demand for these cars dropping, people who overpaid for them and are no longer enamored with them wanting to dump them before prices fall further, new car prices returning to little or no ADM, and used car prices dropping to below MSRP. But this could all take a year or more to unfold. FWIW, I've been tracking used car prices lately, and I do see dealers doing some pretty big price drops to try to move the cars.
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Manifold (11-10-2022)
11-10-2022, 12:04 PM
#2913
Burning Brakes
I will take some bait here, and why or why not to increase production. One, simply making more cars doesn’t just increase margin there’s always a cost component to that increase just to list a few. Facility cost as they can’t keep up with the current supply, dealers are still lacking basic parts for repair, supplier cost has increased, labor rates are sky high, Germany heavily unionized, energy cost. In Europe you can’t just fire employees, and when the economy takes a turn just fire everyone because of reduced demand not in the EU. Look at peloton during the pandemic, and all the tech companies that hired up to the demand and now they’re stuck with all the people …….time to lay off.
Porsche can be happy with their strong margins, and just watch the movie because the risk is building more widgets by adding cost. Many still forget 2008, 2010, 2020 inventory sat yes GT cars at MSRP were all over once the bubbles burst. The C-Suite job is to maximize margin, and simply increasing revenue adds unit cost which may or may not be accretive to margin. Love reading 10k’s where the company says revenue is up 10% YoY, but margin is flat. I use to be the guy telling the revenue story ….easy to spin cost and say revenue is up. Porsche can squeeze the golden goose more to satisfy bubble demand to risk being the top brand and margin marker in the business?? They have high customer satisfaction, and product demand …….the best tool in this environment is to raise the price of the widget to see what sticks zero cost to price increases vs adding risky cost. It’s ok for people to scream to build more, just raise the prices to reduce the screams.
Porsche can be happy with their strong margins, and just watch the movie because the risk is building more widgets by adding cost. Many still forget 2008, 2010, 2020 inventory sat yes GT cars at MSRP were all over once the bubbles burst. The C-Suite job is to maximize margin, and simply increasing revenue adds unit cost which may or may not be accretive to margin. Love reading 10k’s where the company says revenue is up 10% YoY, but margin is flat. I use to be the guy telling the revenue story ….easy to spin cost and say revenue is up. Porsche can squeeze the golden goose more to satisfy bubble demand to risk being the top brand and margin marker in the business?? They have high customer satisfaction, and product demand …….the best tool in this environment is to raise the price of the widget to see what sticks zero cost to price increases vs adding risky cost. It’s ok for people to scream to build more, just raise the prices to reduce the screams.
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Diablo Dude (11-10-2022)
11-10-2022, 12:32 PM
#2914
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‘Agree with you here, but I do have a question I’ve heard stimulus drying up how does that work? I’m sure no one on this board received stimulus, and bought a GT car unless you had some fraud business to dupe the system. Mercedes took advantage of the boom, 2021 Gwagon is 22k less than the 2022 with zero change. Basically they took advantage of the market and the ADM has gone from 100k over to 20k in some markets, but the MBUSA is getting 22k more YOY for the same car with no added labor cost. The dealers that gobbled up all the cars on flips are holding the bag, and you have some Porsche dealers holding the bag doing flips on Turbo’s and some GT cars as they over paid …….look how many 911’s are on floors now vs 3 months ago? Long rant, but I get what you’re saying.
Inflation may slow over the coming year, and some credible people are even talking about deflation, so I think Porsche isn't going to do a big MSRP increase just to increase profits in the short term. And Porsche has be careful about pricing because their whole thing is that these are 'value' sports cars and supercars, offering most of what the exotics offer at a much lower price. Upper middle class people can buy Porsches, can't generally buy Ferraris, etc.
Last edited by Manifold; 11-10-2022 at 12:36 PM.
11-10-2022, 01:19 PM
#2915
My company got significant PPP money, as did most in my industry. It was a lot of money. We did have some slowing in our business in 2020, so the money could be justified on that basis, but we didn't absolutely 'need' the money in the sense that we would have had layoffs without it. I figure we're paying that money back through inflation, so it wasn't really 'free' money.
Inflation may slow over the coming year, and some credible people are even talking about deflation, so I think Porsche isn't going to do a big MSRP increase just to increase profits in the short term. And Porsche has be careful about pricing because their whole thing is that these are 'value' sports cars and supercars, offering most of what the exotics offer at a much lower price. Upper middle class people can buy Porsches, can't generally buy Ferraris, etc.
Inflation may slow over the coming year, and some credible people are even talking about deflation, so I think Porsche isn't going to do a big MSRP increase just to increase profits in the short term. And Porsche has be careful about pricing because their whole thing is that these are 'value' sports cars and supercars, offering most of what the exotics offer at a much lower price. Upper middle class people can buy Porsches, can't generally buy Ferraris, etc.
11-10-2022, 01:20 PM
#2916
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Gotcha - so you only have time to drive your GT3, read this whole thread and only write very brief one line sentences.. 
Did you get your incoming 992 Gt3 yet? Or do you have a previous gen 991? After getting rid of the Performante, i am feeling the need for another noisy less civilized track / canyon type car. But not as a DD - that's my TT. The GT3 would seem to fit the bill - in the ~$260K price range. Not "worth" more to me than that.
Did you get your incoming 992 Gt3 yet? Or do you have a previous gen 991? After getting rid of the Performante, i am feeling the need for another noisy less civilized track / canyon type car. But not as a DD - that's my TT. The GT3 would seem to fit the bill - in the ~$260K price range. Not "worth" more to me than that.
11-10-2022, 01:36 PM
#2917
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11-10-2022, 01:46 PM
#2918
Burning Brakes
Inflation may slow over the coming year, and some credible people are even talking about deflation, so I think Porsche isn't going to do a big MSRP increase just to increase profits in the short term. And Porsche has be careful about pricing because their whole thing is that these are 'value' sports cars and supercars, offering most of what the exotics offer at a much lower price. Upper middle class people can buy Porsches, can't generally buy Ferraris, etc.
11-10-2022, 02:11 PM
#2919
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Inflation is just one dynamic, folks are still paying $50k+ ADM on a car that has been in production from 1.5 years in a recessionary environment when interest rates have 2x/3x. Porsche noticed this year and raised prices $8, or 5% already. The GT3RS is $224k, so even if they only raise a modest 10% you are looking at $246k for the Rs, so mid $190s seem fairly plausible, sweet spot between GT4 RS and GT3 RS.
11-10-2022, 03:16 PM
#2920
Race Car
Could be. But for the GT cars, guys who buy them for the track may think twice if the prices get too high. I have to convince myself that it makes sense to track a car costing ~$200K+, seems a bit much. Guy next to me in the paddock at the track this weekend was tracking a $7K Miata, and his DD is a Cayman S. Guy next to him was tracking a $40K Chevy, but he has a 488 and R8 for the road. I personally wouldn't buy a GT car for road-only use.
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11-10-2022, 05:04 PM
#2921
Burning Brakes
EDIT: Not that I would ever help you with that bozo response, but anyone else is welcome
Last edited by welikethetrack; 11-10-2022 at 05:07 PM.
11-10-2022, 09:29 PM
#2923
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shrimp money (11-10-2022)
11-10-2022, 10:17 PM
#2924
Race Car
The SPR level is over 35% lower from where it was a year ago.
Unless we have no plans to refill it, won’t energy costs go higher once we do?
Unless we have no plans to refill it, won’t energy costs go higher once we do?
11-11-2022, 08:02 AM
#2925
Looks like Porsche ADM is a deal
Not sure this link is functioning correctly see the last thread sorry.
https://www.carscoops.com/2022/11/an...ced-at-154005/
Not sure this link is functioning correctly see the last thread sorry.
https://www.carscoops.com/2022/11/an...ced-at-154005/
Last edited by Maverick787; 11-11-2022 at 11:20 AM.