Trader220

Savy,

Thanks, and I don’t take anything from anonymous people on the internet personally. It’s a vast internet and I have found it all too easy for people to write whatever they please with no recourse or fear of recourse since its anonymous. I am a frequent poster on several options trading boards and I have found the people there to be quite a bit more outrageous and arrogant. Most of the posting there are questions or comments about strictly factual information, why and how a particular option or options position is priced or works. IN that world there is always a definitive answer and the facts are easily shared, many times resulting in egg on the face of people, who then lash out. For the most part I have found the collection of people on rennlist to be a great bunch of folks who share the same passion for the cars as I do. I have helped dozens of people get better dealers and more informative acquisitions from their local people with zero expectations of doing business with them. On the other hand telling people how they should feel about sales people, how sales people should act/react and how PCNA should run their business is a bit ridiculous.


tr220

mjsporsche

Howard (Trader),

I also appreciate both points of view. Perhaps you can shed some light on the Porsche business model for 2010. At first glance, reducing supply with assumed similar demand will place less pressure on pricing. So, the margins on fewer units will be better than reduced margins on more units. OK...I got it. Good macro economic model.

Yet, what I do not fully understand are the other implications as we get into the micro economic stuff. Perhaps fewer 2010 units sold will require fewer distributor / port / dealership employees that perform all the stuff required to get a vehicle off the ship and into the customer's hands. Perhaps fewer 2010 units sold will have implications on the service end of the business. When you begin to consider all the issues that units produced and sold have on so many functions in the build, ship, prepare, sell and service side, you wonder what the Porsche business model for 2010 is all about.

If I was a Porsche dealer principal, not sure I would be that happy.

Mark

PS...hope you are doing well. Two locations...nice!

Trader220

Mark,

Long time since we spoke, I still see the vette in your avatar. You bring up some really interesting points which are common in any macroeconomic debate. Those are the same questions economists and CEO’s have wrestled with since the beginning of time, whether it is in goat sales or car sales. Unfortunately I don’t have access to PCNA or Porsche GmBh’s business plans, so I cant really shed any factual detail on the subject.

Service is an interesting question, since that’s where the dealers really make their income. Will fewer new car sales increase service as people hang onto their older cars?

Mark, as always its good to hear from you, hope all’s been well. Sorry I cant add any insight to your questions.

Howard

talkinghead

Howard, I think you are right about service being a prime contributor of income now. However, that wasn't the case a year ago and prior, according to a confidant. Since the meltdown, service has kept the dealerships afloat and prior to that, the sales department led the income. True?

brendo

i too disagree with much of CGT's opinions, especially around his pricing commentaries but i respect the discussion here.

not to hijack, but i'm glad stoppie's not here for this discussion. i know i'm not alone and that many do not share that opinion, but i wanted to put it out there. this thread is so very civil, i'm not sure i'm in the right place.

PogueMoHone

That has always been the case, so nothing new there!

Trader220

As far as I know service has always and will always be the prime income source. I know on the Audi side we're the number one dealer in the nation and just about all of the cars are sold for little to no profit at all.

talkinghead

I defer to the Trader on this subject!

.

Fahrer

As the dollar has lost much of its value the German auto co's have squeezed the dealer margins for the cars sold in the US. Even before that, internet shoppng has had its impact on the business over the years. I believe that the idea that dealers do not make money on service work goes back to the 60's and 70's when dealers were not paid much for warrantee work.....they had to share the pain for the defects, etc. It really mattered whether you bought the car there or not. This is no longer the case these days. I makes good business sense to have the service and sales as stand alone profit generators.

dasams

I've also been following this thread with interest and agree with most of your comments. The answer to the above, IMO, is no. Fewer new cars sold means a smaller fleet in service which means less service income down the road, all else being equal. dave

Trader220

Dave, I agree that may be the case down the road. In the short run if people hang on to these things longer then service will step up. I dont work on the service side so like everyone its just speculation.

dasams

Are you assuming that the preowned car will be idled if the owner buys a new car? My thoughts are that a new car sale means the preowned goes to new hands which inceases the fleet. dave

RH512

I don't think it has been expressed but Porsche dealers now have the Panamera to add to the stable. I have no idea on the projected volume and dollars (or profit) but I would think that this will offset at least some of the reduction in sales of existing models.

mjsporsche

No doubt the Porsche business strategies are really hard to assess from our vantage point. The USA new model sales is only one segment (albeit an important one) of the entire Porsche operate model. Many business drivers exist that we do not have any line of sight.

I do find it interesting the approach being used by some brands to accept minimal profit on new vehicles to get them on the road. Afterall, somewhere in the chain is profit.

When thinking about the service side which has been important to the auto business for decades (ask a dealer principal about its fixed ops absorption factor), it reminds me of the somewhat famous Gillette business model of giving away the razors so that you can make the profit on the blades. That model is still being followed by shaving / razor businesses. And we all know how crazy the pricing is for those blades.

Ok...back on point.

Maybe I am hoping for Porsche to reconsider its planned tightening of supplies of new vehicles. Afterall, I so much want to give Howard some business!! Make mine a PDK Turbo, super sized...at cost!!

Trader220

I think a lot of the margins are left up to the dealers. Naturally my own perspective always reverts back to that of an options trader and portfolio manager since that’s where my 20 years experience lies. The basic idea is that as a trader on an options floor you have two schools of thought. You can do a piece of every single trade that hits the pit even if it does not trade on the bid or offer. The net effect of which is doing a lot of volume for slim amounts of edge. Then there were always guys who did very few trades each day but stood around and waited until a big trade went up on the bid or offer and did their share. The net effect was few trades but large amounts of edge on them. When you’re a dealer selling cars, you’re doing one or the other all the time or somewhere in-between. The market is only giving traders so much edge per volume at any given time, whether you choose to participate is a business decision. Some dealers are fine selling fewer units at bigger edge and some businesses want to sell as many units as they can no matter what the edge/margin is.
Porsche is going to tighten supply because on their end they don’t like selling cars for 20% off, they feel it hurts the brand name. There are dealers who will discount more than others no matter what the markets are doing. There are clients who will deal on whatever market they’re shown for their own personal reasons. In those cases both the dealer and the client makes their own choices. What occurs frequently on rennlist is mocking and trash talking by many about dealers whose business model is to sit back and not sell below a determined margin, and then to lump all dealers together when the rennlisters is frustrated with an encounter. Of course there are those rennlisters who don’t fall into that trap, Mark, aka msjporsche is one of those guys, so thanks Mark. He and I have had many discussions about getting him into a car and we’ve been somewhat close at a few different times. Management here is very aggressive on price but we’re just not quite to where Mark needs to be, no harm no foul.
The car business is not a whole lot different then most others, there is product to sell, and buyers in the market. Sometimes the margins are big, sometimes they’re thin and many times they’re all over the map from different sellers.