Pete

They might have perfected the turbo but I'm pretty sure the Corvair Monza in the early '60s was available as a turbo, long before the Turbo Carrera of 1976.

Pete

mborkow

i believe economists call that a giffin good.

RallyJon

No, a Veblen good.

Jukelemon

Just to let you know, I was given a deal of 79.9k on a 2006 CS a couple of weeks ago right before I bought the 993. Sticker on it was 92k. I could have got it a little cheaper BUT that would make the margin about 16k on a 91k vehicle. Not too bad AND a reasonable proffit.

Deanriffs

Yes, new car sales are only part of the income stream for many automotive OEMs. Other examples of the value stream for car manufacturers are parts sales, other merchandise, financing and licensing. Remember when GMAC was making more money than GM's North American operations? The last item is probably not applicable to Porsche, but it illustrates the point.

fast1

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

What you propose would be very risky for Porsche since they would lose their exclusivity image that so many buyers crave for. Now whether or not Porsche could offset that lost market by regaining another market is problematical. Taking a risk to get the same overall gross margin is hardly one that Porsche would ever take.

Mark Harris

This is one of the best thread's I have read since joining Rennlist because it demonstrates the intelligence of the Porsche community. I wish the select few staff members of our company that are owners and see a monthly P & L could understand what Jimbo & Bull are saying.

For those not versed in business, GM is based on immediate production cost. That is, cost of materials coming into a plant plus the immediate cost of labor and processing. It does NOT include any periferals like development costs, depreciation, facility overhead, taxes, employee benefits, financing costs, marketing functions, administrative functions, etc, etc, etc. Most value-added businesses operate on at least a 40% GM with a few down into the 30's.

This is so right on the money if you are in manufacturing. I watch our GM like a hawk and it MUST remain above 50%. We had a banner year in 2006 (profits) but like Bull said our bottom line (net profit after tax) was slightly above 10% which I consider acceptable.

All the other banter in this thread was really fun to read, except maybe for a well dressed man that needs to learn how to use paragraphs and capital "i's".

CP

I don't own Porsche stock. But if I had only 1 share, they will send me their annual report, and I can look at the annual statements to ascertain gross profit margin, also after-tax margin. Can anyone get a hold of their annual report?

I would assume the weighted average sales price of a Porsche is roughly $65k. If true, that is 43% return on sales ($28/$65). That is truly stunning for a mass-market consumer item. More power to them.

Now I am not saying this is unachievable. I have done multiple spec home projects in the Bay Area returning 45% on investments, net of ALL costs besides income tax. One project actually hit 100% ROI, and we don't even leverage.

CP

Mike Murphy

I worked for GMAC Commercial Mortgage, and still currently work for the spin-off. We were keeping GMNA afloat right up until they sold us to investors.

Porsche's most expensive sports car is still cheaper than many other high-end equivalents, so there is still value there. Don't forget that there was a day when these 911s weren't selling. Today, they are selling like hot cakes. When demand is high, you can expect profits to be high as well, especially if the business knows what they're doing.

Mike Murphy

It also explains how a pharmaceutical drug manufacturer can markup a drug 17,000% and still only make a 10% overall profit. There are so many other costs to consider.

Wilder

Porsche is the most profitable per-unit car-maker in recent years. In my mind it really boils down to two fundamental reasons: Tremendous production efficiencies through things like shared platforms and adopting Japanese production methods and brilliant marketing that has enabled them to maintain their premium pricing strategy despite the deluge of cars that they now sell (about 30k per year in North America alone). If I recall correctly, only 5k or so cars sold per year between 95 and 98. Build low + sell high = $28k per car.

Before the flames start, I realize this is a simplified argument but reasonable nonetheless.

creator8

I wasn't saying they should. I'm betting they could. But why would they. They've attained essentially a holy grail for a manufacturing company where the perceived value per unit far exceeds the cost of production.

Its similiar to the energy drink market. Do you honestly think a can of Red Bull or Rockstar that retails in the $1.99 range costs any more than the can of coke sells as a twelve pack for the same price. Or a Luis Vuitton wallet. Maybe its going to cost at the most double to make over a regular nice quality non brand wallet that retails for say $30, except it retails for $300.

Porsche isn't going to change a thing. Sure they are having to quietly discount their cars at the moment because a. the market is soft and b. quite honestly the 997s are overpriced when compared to new retail prices of similarly specced 996s. They've got room for that.

But they will continue to slowly roll out new lines like the Cayenne, Cayman, and forthcoming Panamerica (??) that can benefit from the brands halo effect. The Cayenne and the VW Touareg have to have similar unit manufacturing costs yet there's a big difference in their retail price on like for like models.

Porsche not only make great cars, they do good business.

Jack Esposito

There is another issue that hasn't been discussed here yet and that is the dollar exchange rate Porsche sets for different countries. For Canada, the exchange rate Porsche sets is about 1.42 even though the true dollar exchange rate is only about 1.17 today compared to the USA dollar. Base price on a Cayman S here in the USA is $58,900 where as in Canada it is $83,300. Based on todays 1.17 true dollar exchange rate the Caymna S should only sell for $68,913 in Canada, so it looks like they are making an extra $14k on Canadian sold cars. The local Canadian dealer manager I spoke to last year said it makes it very difficult for him to sell Porsche products with the inflated prices when someone can drive across border and buy the same product much cheaper in the USA. I know the local Porsche dealers here in Washington state are not allowed to sell new cars to Canadians, if they want to keep their dealership with Porsche. Therefore if you want a new Porsche in Canada you have to pay the price.
So $28k profit per vehicle seems possible on the average if some countries are paying more than their fair share, like the Canadians are.

Jack

Slow Guy

Sorry Jeff, I've gotta object to your putting diamonds and Porsche's together on this. Just because DeBeers has done a excellent job of marketing a relatively common stone and Russia hasn't seen fit to dump their stockpiles on the market doesn't justify the prices they get for those stones.

Sorry, diamonds are just a sore subject with me because of my wife's obsession with them. If we hit the lottery this week I swear she'd blow half of it on jewelry!

InTheAir

I keep asking my wife if she will let me have her ring for a couple days. I can get that diamond replaced with a bigger CZ.