Randy 1

I am willing to believe these figures. Keep in mind: Porsche probably has the lowest model line:volume ratio in the biz. That translates to massive economies of scale. I mean, two of their models (their hottest selling, I might add) is built on almost an identical chassis (Boxster, Cayman)! They've reused a preponderance of the Toureg's chassis for the Cayenne. And remember all those 1999 911's that shared the infamous Boxster front?

All in the name of cost savings. So figure that they only had to do research for 5 model lines in the last 6 years (911, Boxster, Cayenne, CGT, Panamera), and that most of those had shared their development costs (nex-gen 911/Panamera, Boxster/Cayman, Cayenne/Toureg)...I would chalk this up much more to Porsche's fine management than greed.

Add in credence good pricing (i.e., "It's expensive, so it must be good"), and that adds up to a phat margin.

joey c

hey fast freddy,last week i was at saks buying clothes...on the sale rack was an armani suit for 2200bucks,on sale for 1000...i bought armani slacks for 495,on sale for 220...other slacks that were 300..sale was 120..zegna slacks 299,sale for 85....now i am sure that they sold plenty for list price,but they are brand names..porsche is a brand name..way over priced..of course people will pay..just like they do in saks..i wish i was the porsche ceo..great business..but as a consumer,i would never ever pay 70k for a coxster s,base whatever..its a rip off..for 40k i can buy a 2002 996..its not the prettiest car made but its a porsche with 300 + horsepower..and a 911...hey to each his own..i used to be the paying 2200 for the armani suit..no more..and i now make 3 times what i used to make..i guess i am ok with the sale rack..and the used car lot..i am sick of trading cars and losing 5-10k..i drive a 87 911 that is a ball to drive and i wont lose much at all when and if i sell it..this is by no means a critisism on what others do,its something that i do and it works...if i hit lotto i might not care about paying 50 percent above the cars worth..but i havent been close so....good luck,j

fast_freddy

My point was simply to indicate that the market supports the prices Porsche sells their products at, nothing more. Where did I criticise you in my post?

RallyJon

There are several ways to look at this. Certainly Porsche gets a lot of credit for figuring out how to make such an apparently cheaply built car to look so good and perform so well.

But I just have a problem with obscene markups. Like joey c, I know that a $2000 suit at Nieman Marcus is really a $500 suit, and because I know that, I could never bring myself to pay $2k for it no matter how much the fawning sales clerk kissed my ***.

Maybe if I knew that Porsche's surprisingly low CGS was all due to efficiencies in production, and none of it came from cheap materials or shortcuts in assembly... but who really believes that?

Randy 1

I think there's a happy medium here. Remember our beloved marque almost shuttered the shop not much more than a decade ago. That was the primary reason for the early 996 debacle.

And could Porsche reasonably discount their cars much more without damaging their brand equity? Really? Would we really lust over these cars if any CPA or ambulance chaser could buy one? Of course not. They're objects of desire, and should be priced as such, precisely to preserve that sort of esteem. Of course, jacked up trannies (see CP's post about his Cayman) and declining quality of interior pieces probably don't do much for the J.D. Power ratings, and on that, feel free to excoriate Stuttgart.

As a buyer, it doesn't feel good to be bent over like that at the till, but...man, they're Porsches!

InTheAir

...And a diamond is just a rock that is incredibly plentiful, yet it's the marketing and industry that makes it "valuable". Who here wants the cartel to open up the mines and freely harvest diamonds? Not me, because I'd be embarrassed to think about how much I spent on my wife's ring.

Keep the air of uniqueness in both diamonds and Porsches.

tj90

Automakers are eyeing China as the next frontier to boost margin. I heard that GM? is looking at producing a car in 2008 that has a target MSRP of $8k. I suspect that, like everything else, MSRP of a new Chinese car that normally sells for $16k when its built in Japan or US will not have an MSRP of $8k but probably higher. If the market will tolerate a higher price the companies will offer it. Its all about market demand. Reminds me when the record companies were telling all of us that CDs were less than 10% the mfg cost of producing vinyl and that "in the future" CDs will be a fraction the cost of vinyl. Well I never saw the discount and prices actually went up. In the end, I guess the market won by getting their music a-la carte or free.

The point of my post is to say that the free market will always get its way. If enough guys think Porsche is overpricing their cars, they will come down in price. If enough people think the 993 is overpriced, the cars will depreciate faster. If Porsche COGS are low due to inferior materials, design and poor durability, it should show in warranty costs over the next 2-3 years.... As far as Im aware, manufacturers have not been reducing warranty coverage. So its a gamble that the mfgs are taking...

My neighbor just picked up a 2006 VW bug for 8k dollars! Why would anyone buy a daily driver new?

I question the validity of the article. I would think that profit numbers are held close to the management. Im sure you can calculate or approximate the profits, but how accurate is it, when you dont have all the data that the previous posters have mentioned?

texas911

All you 993 guy who keep thinking that the 993 was hand built probably never saw the pictures of 993 and 997 going down the production line together. And never saw the post of the guy who went to the Porsche factory tour where he witnessed the 997 engine being built by hand by one guy. Its a misconception that somehow the 997 is built like a Toyota.

JimB

If all they did was take net income and divide it by the number of cars each of these companies sold the numbers could be very misleading. I remember reading a couple of years ago that Porsche earned more profit from their euro to dollar hedge than they did from car sales. There are a lot of ways to make or lose money other than the margin on car sales. It would be interesting to see a gross revenue/cars sold number. I bet it would be much higher than the average sale price of the cars. Just a guess. I'm no accountant.

tj90

Its interesting to read the comments on the article. Apparently this profit is from the vehicle division. I heard somewhere along the way that 1/2 of porsche profit is due to royalty payments from other auto makers. For example, I heard that porsche owns the patent rights to embedded antenna in glass. Didnt they first develop the turbo for auto use as well? I wonder if there is royalty payments for turbo-charging.

InTheAir

Ahhh, 997? Don't you mean, 996?

creator8

As with all luxury goods, there is a huge amount of "perceived" value in a product. I work in the auto biz and was having a conversation with someone in the know on this actual topic. If you look at a Porsche purely from a standpoint of its raw material cost, how much more expensive can it be to produce a 997 than say a Nissan 350Z that has about the same material density and retails for just over 30% of the price. You can't tell me that Nissan's R&D costs are any cheaper than Porsche's--I'd actually bet they are higher. The only real difference is Nissan's ability to amortize those costs over more cars sold.

Its a simple supply and demand scenario really. Porsche keeps their cars "scarce" through marketing, pricing and supply so they can keep the price high. I would bet that they would sell a hell of a lot more cars if they cut their price significantly and probably end up with the same gross margin overall. Its an obviously interesting and very successful business model that so many brands look to attain.

mborkow

here in the bay area, i see way more boxsters than 350zs

chris walrod

That could very well be since a FORD F-150 pickup has $5700 in T&M..

Pete

Some of you old-timers will remember when Mercedes was not an expensive luxury car. I recall reading where MB adopted the philosophy of simply raising the price of their cars each year until they couldn't sell them. I'll be darn, several tens of thousands or dollars later, they're still selling them! I think it's called "what the market will bear" or something like that.

Do I think we should organize an embargo to get Porsche to lower their prices? I don't care because they aren't going to lower them enough to get me to buy a new one. I like a 10 year old 993 that I paid less than 50% of the new car sticker price just fine, thank you.

Pete