Paul S.

Bear in mind that the average margin, whatever it is, if it includes Ford, GM, and DC, is really low because the "big three" have staggering retirement and health care costs (which add more to the price of each car than the steel it's made with). That's why I fully expect GM to file bankruptcy--wait and see.

But no question, just like the big three make a much higher margin on SUV's selling in the $40,000 and up bracket, Porsche has margins that are the envy of the rest of the world auto industry. And selfishly, I'm glad, as I like Porsches. They need to make money or they'll cease being viable as an independent OEM.

Unlike Ferrari which (I think) still loses money to this day and of course, isn't independent.

GT3BB

Most companies would be happy with a 5% profit after all is said and done. If Porsche is higher than 8-10% I would be very surprised.

MMD

What's nice about it is nobody is crying poverty when buying a Porsche. People with the necessary cash almost stand in line to buy one. Also, the company takes very good care of their employees. Their employees are fiercely devoted to doing a good job and being loyal to the company. Their products set the standard for performance and quality. The company is very profitable. WTF more could you ask for? I'm glad my money goes to reward people for doing a great job.

sato

Actually 2x cost would be a 100% margin. In reality the margin Porsche would book on a 911 would have to at least take out the dealer's cut, so that would reduce the margin to lets say 75%. Also, I didn't factor in other costs to the company like executive salaries, pensions, health care, insurance, marketing, R&D, etc. So, Porsche's bottom line profitability for its entire enterprise likely is much less: 20% may well be spot on. All I am speculating about is the difference between the sticker price we see and the cost for parts and labor averaged over a 911's 5-year production run.

Fast40th

And beyond the cost of parts, manufacture, R&D, testing, marketing, etc., the embedded "mystique/dream" attribute of Porsche vehicles carry an additional intangible cost included in the MSRP.

RWO

About 1/3rd of retail. That assumes you are talking parts and labor to build the car only. No markeup for any other expenses...

dolphin_vic

well...why do we need to calculate if Porsche is charging too much or not? People in business should make money. I do found out no problem with them to have 100% profit since they are really doing a good job in advertisment, quality, performance and it's a well known famous in the Automotive industry.
Just like Rolex. Do you talk about price when you are buying a Daytona? they have markups and shortage. Like Carrera S and GT3? it's a matter of Demand and supply. People who love to buy it I think they will get any way to make money to buy no matter how much it cost right?

jcnesq

When I bought my wife's Cayenne S, after signing the papers I noticed a VW Touareg with a window sticker about half the $68K sticker on the CS. No doubt CS has quite a few better components, but it still makes you wonder.

Chris Stack

For what year did the R129 cost $45k to make? Did MB plan on continuously producing that car for 10+ years (or however long it was) and depreciate the tooling over that timeline? Or did they depreciate it over 6 years, and make ridiculous profit per vehicle on the remaining production? One would hope they would plan correctly, but who knows? Also, MB is a much higher volume maker than Porsche, with a full model line (plus Chrysler!) to share components like seat motors and climate controls and ABS systems and 1000 other invisible components.

Porsche is so unique in the automotive world, with a much higher production than other firms like Ferrari and Lotus that have high R&D costs on their products, but so much lower than MB, BMW, Audi, and anyone else. And Ferrari and Lotus are both owned by much bigger companies. Really, probably the most comparable to Porsche in terms of size were Volvo and Saab, but both were significantly bigger and are now owned by Ford and GM, respectively. Really, I don't know that there are ANY carmakers that you can make a relevant comparison of Porsche to (in a business sense). Everyone else is either way too big, way too little, and/or owned by someone else.

djantlive

A typical full size American made SUV costs around $7-8k in assembly, parts, transportation and testing costs.

Given Porsche engines are mostly hand built, interior is often customized, uses more precious metal (boron steel etc) and has highly quality parts, I doubt if the manufacturing cost of each 997 is over $20k. Manufacturing of the 996 / 997 is pretty streamlined although still labor intensive compared to a American truck.

This might be hard to swallow but consider a $50k SUV costing $8k. Read a car maker's annual report and you'll find: R&D, pension costs, manufacturing plant revamped (billions), marketing to be amongst highest expenses. Automakers invest heavily and the manufacturing operation expense is just a tip of the iceberg.

boolala

My point is that since Porsche is the most profitable car company and MB manages to make 100% margin on the SL I would expect Porsche to make more per vehicle. It's true that the R129 had a 13 year model run with only a single major engine change (used in MBs other vehicles as well) in that time period so its costs may, in part , have reflected the longevity of this particular model.

Putt-Putt

If this were true, wouldn't many larger car companies be building competitors to the 911?

MichaelL

This thread is generally an excercise in futility. Contributors with little knowledge of automobile development and production and no specific information about Porsche's specific business practice are offering uninformed and biased opinions. Their views probably bear little resemblance to actual facts. One of the first principles of professionalism is to practice only in areas where you are competent and knowledgable.

fast1

Actually 2x cost would be a 100% margin.
Margin = Profit/Price. If my price is 2 times my cost, then my profit would be price (2X) - cost (X) which is equal to a profit of (X).Therefore, Margin = Profit/Price or X/2X = 50%.

In reality the margin Porsche would book on a 911 would have to at least take out the dealer's cut, so that would reduce the margin to lets say 75%. Also, I didn't factor in other costs to the company like executive salaries, pensions, health care, insurance, marketing, R&D, etc. So, Porsche's bottom line profitability for its entire enterprise likely is much less: 20% may well be spot on. All I am speculating about is the difference between the sticker price we see and the cost for parts and labor averaged over a 911's 5-year production run.

I'm not certain what you mean by the Dealer's cut, but the Dealer buys the car from Porsche at the wholesale price, and then resells it to the consummer at retail. There may be holdbacks but it's lost in the rounding. Now occassionally Porsche will help its Dealers sell a slow moving car like the its 911 Anniversary edition, but that's the exception to the rule.
Before any company establishes a price for its product, it must accurately calculate all of its costs and then determine a price. When I say that Porsche makes about a 20% margin, it includes all of its costs and certainly not just its manufacturing costs. As I posted earlier Porscche's R&D costs are high and they are spread over a relatively small number of units.

fast1

If you have the interest, it's not that hard. Porsche publishes its financial records, and its margin is public record. Of course its published margin will include profit from all sources, but it will give you a ballpark number.

Okay, I'll do it for you.
Porsche AG: Highlights Financial data in Euros
Financial HighlightsSales 6.57 Bil
Income 782.50 Mil
Net Profit Margin 11.90%
Return on Equity 33.77%
Debt/Equity Ratio 58.18