Shulou(Shulou.com)11/24 Report--

In the electric era, the transformation challenge of Porsche is still arduous.

1. Porsche went public. Due to the delay and repetition of COVID-19 's epidemic situation in winter, as well as the influence of multiple adverse factors such as food crisis, energy crisis, inflation and so on caused by geopolitical conflicts, 2022 has become an extremely cold year for the global capital market.

The number of global IPO has fallen by nearly 70% this year compared with the same period last year, and the amount of financing is less than a fraction of that in previous years. Take the weather vane of the global capital market, the US market as an example, in the first half of 2022, the amount of capital raised by initial public offerings of US listed companies was only 4.8 billion US dollars, while that of 2020 and 2021 was 177 billion US dollars and 155 billion US dollars respectively.

In a cold environment, Porsche went public, but it became very popular.

On September 29, Porsche, an ultra-luxury brand owned by Volkswagen, was listed on the Frankfurt Stock Exchange. In honor of its legendary model Porsche 911, Volkswagen Group has issued 911 million shares under the listing code P911. Porsche's listing price is 82.5 euros per share, compared with the previous guidance price of 76.5-82.5 euros issued by Volkswagen, which shows the market's popularity for Porsche shares.

At the close of the first day of trading, Porsche became the world's fifth largest carmaker by market capitalization after Tesla, Toyota, BYD and Volkswagen with a market capitalization of US $75.86 billion. Since then, Porsche shares have continued to rise to 93 euros, with a market capitalization of 85 billion euros, surpassing Volkswagen to become the fourth largest car company in the world by market capitalization.

The listing of Porsche raised about 9.4 billion euros for Volkswagen and created the largest IPO in Europe since 2011 and the second largest IPO in German history.

In the cold capital markets, all this is so exciting that the media hailed it as a milestone.

But why did Porsche behave like this?

Simply put, because Porsche is an extremely high-quality asset. Porsche's profitability is very strong, with sales of 28.515 billion euros, 28.695 billion euros and 33.138 billion euros respectively between 2019 and 2021, while operating profits reached 3.862 billion euros, 4.177 billion euros and 5.314 million euros, respectively. In 2021, Porsche accounted for less than 3.5 per cent of Volkswagen's sales, contributing 1/4 of the group's profits.

In the first half of this year, amid the overall downturn in the global luxury car market, Porsche's sales revenue and profit continued to grow rapidly, reaching 17.92 billion euros and 3.48 billion euros respectively, with a sales profit margin of 19.4 percent. You know, the Volkswagen brand's profit margin is only about 3%, the first-tier luxury brand Audi's profit margin is only about 10%, and the Bentley is just over 13%.

Therefore, such a goose that lays golden eggs listed on the IPO is naturally welcomed by the capital market.

However, behind the hustle and bustle of Porsche listing, there are also some calm voices that: in the context of electric cars have become the trend of the times, the future of traditional ultra-luxury brands is unclear, and Porsche's market capitalization is overvalued.

2. The core reason why the electric dilemma of traditional luxury brands has become luxury cars is that they far exceed the performance of ordinary models, such as Porsche's legendary model 911. In the Le Mans series, one of the three major races in the world, Ferrari won 109 championships in 89 years. Ferrari won 239 Grand Prix victories and 16 annual team championships in F1. What supports this performance is the historical accumulation of luxury car companies in key technologies such as engine, gearbox, chassis and so on.

However, in the era of electric vehicles, the accumulation of this technology will have to return to zero, and the "three electricity" (battery, motor, electronic control) technology has become a new basis for the performance of electric vehicles. The three electric products and technologies that luxury car enterprises can adopt are not essentially different from other electric vehicle companies, and even lag behind some newcomers in electronic control technology.

In addition, the strong performance experience that luxury cars used to be proud of has become commonplace in the era of electric cars. An electric car of 200,000 to 300,000 can step into the acceleration range of 100 kilometers in three seconds, while the same level, equipped with V6\ V8\ V12 engine luxury supercar, often needs millions.

As for the traditional luxury cars in the past regardless of the cost of interior materials and personalized butler service, there is no barrier to competition, rising stars can follow suit.

More importantly, in the era of electric vehicles, intelligence has become an important symbol and differentiation of electric vehicles, and intelligence is based on the software capabilities and data algorithms of car companies. Tesla can lead the development trend of the electric vehicle industry because of his strong ability in software and algorithms. However, at the technical level of intelligence, luxury car companies, which have always liked to work hard on engines, are obviously lack of accumulation and practice.

Generally speaking, luxury car brands in the electric car era will face the risk of losing their core competitiveness. In fact, this is already happening. The performance of Mercedes-Benz, BMW, Audi and other traditional luxury brands in the electric car market is far worse than that in the fuel car market.

There may be a view that luxury car brands bring users a sense of dignity and value that many emerging car-building forces do not have. But historical experience also tells us that luxury brands without technology and product power will only be a thing of the past, such as the functional machine era luxury brand Vertu mobile phone, the early luxury laptop Sony VAIO is a precedent.

As a traditional ultra-luxury brand, Porsche, which stands at the historic crossroads of the development of the automobile industry, faces arduous challenges of transformation and upgrading, which is self-evident. But why can the capital market still give it a very high market valuation? The reason is that in addition to Porsche's strong profitability at this stage, the capital markets also seem to have confidence in its future electrified transformation.

3. Porsche's electrification efforts in the face of the surging electrification tide, different from the hesitation of a group of ultra-luxury brands, Porsche's new energy and electrification transformation is relatively early. In 2010, Porsche launched the 911 GT3 R hybrid supercar; in 2014, Porsche launched the plug-in hybrid version of the Panamera and Cayenne; in 2015, Porsche launched the first all-electric four-seater concept sports car, Mission E in 2019, the production version of Mission E, which is also Porsche's first all-electric sports car, the Taycan. By contrast, the first mass-produced electric car of Maserati and Lamborghini has just been unveiled this year, while the first electric car of Ferrari and Aston Martin will not be available until 2025.

In terms of time alone, Porsche is ahead of other brands at the same level in terms of strategic foresight. This is because on the one hand, electrification of new energy has become an irreversible trend of the times, whether you like it or not; on the other hand, there are opportunities in the challenges. If the transformation is successful, ultra-luxury brands can not only continue to maintain a high premium for their own brands. It can also reap the rich people who need high-end brands in the electric car market.

In terms of product performance, Porsche's first pure electric model, the Taycan, is also comparable. It is the first mass-produced model with a system voltage of 800V (the common system voltage of an electric car is 400V). The flagship Tavcan TurboS can output supercharged power up to 560kW (761v). It takes only 2.8s to accelerate from static to 100km/h, with a maximum speed of 260km and a mileage of 527km. Under ideal charging conditions, it takes only 22.5 minutes to recharge from 5% to 80%.

After the listing of Taycan with strong performance, it has been widely concerned by the market. In 2020, Bill Gates revealed on a talk show that he had just bought a Porsche electric car, the Taycan. "although it has a high premium, it is cool," he said. "this is my first electric car and I like it very much."

Bill Gates, who has always praised Tesla, chose Porsche Taycan as a result, which shows the correctness of Porsche's electrified transformation strategy.

In 2021, Taycan delivered a total of 41296 vehicles worldwide, accounting for 13.7% of the brand's total sales, surpassing its trump card Porsche 911.

After the first victory of the electrification transformation, Porsche continues to expand its pure electric products camp, with plans to launch the Macan, Cayenne and a flagship cross-border electric version in the coming years.

In key areas of battery technology, Porsche has invested heavily in core technologies such as battery systems and battery module production. Its Cellforce Group joint venture with battery company Custom Cells in Tubingen, Germany, is expected to achieve mass battery production in 2024.

In May, Porsche joined other investors in investing $400 million in lithium-silicon battery company Group14 Technologies for the development of new power batteries. It is reported that Group14's silicon-carbon anode material allows lithium-ion batteries to store 50 per cent more energy while reducing internal resistance for faster charging. Group14 will provide products to the Cellforce Group, Porsche said in a statement.

Investment in battery factories and new battery technology is undoubtedly good for Porsche to develop its electric vehicle business.

In the research and development of electric platform, Porsche combined with Audi's latest PPE (Premium Platform Electric) pure electric luxury platform also shows good technical strength and better adaptability. The pure electric version of Macan will be the first all-electric model under the PPE platform.

It is also worth mentioning Porsche's charging service, in addition to the existing third-party charging service partners, Porsche also announced the construction of its own charging infrastructure. It is reported that Porsche's advanced charging stations will first be set up in Germany, Austria, Switzerland and other European regions, and then expand in key areas such as China and North America.

The huge investment in self-built charging infrastructure does not seem to be necessary for ultra-luxury brands whose market holdings are not destined to be too high, but in Porsche's view, "this is not just about charging, it is also about bringing more convenience to our customers." this is very important to us, we focus not only on the electrification of cars, but also on the customer experience outside the car.

The self-built charging system also shows the ambition of Porsche electrification from the side. According to Volkswagen's "2030NEWAUTO" strategy in 2021, Porsche plans to invest 15 billion euros in electrification and digitization. It is expected that by 2025, sales of pure electricity and hybrid models will account for half of the total sales; by 2030, the proportion of pure electric models is planned to reach more than 80 per cent and carbon neutral.

4. Hidden dangers still exist, there is still a long way to go, Porsche is speeding up on the road of electrified transformation, and has made a good start, but on the whole, its electrified business is hardly optimistic, especially in the aspects of digital software technology and product quality. Porsche still has a lot of challenges to face.

Since the launch of Porsche Taycan in 2019, there have been several recalls. In particular, in 2021, Porsche recalled 43000 Taycan models worldwide due to software problems that caused a sudden loss of power while driving. According to media reports, a malfunctioning vehicle will "switch directly to emergency mode at any speed without warning" and will not receive any warning.

Porsche product experts said at the media meeting that the problem was a software problem, that is, there was a problem with the communication between the vehicle control unit and the internal inverter of the power electronic controller, which could be solved by software upgrade.

Interestingly, many new car-building forces, such as Tesla and China, can often solve the upgrade problem through the OTA of the software, but Porsche has to use a time-consuming and laborious recall method. The reason is not mysterious, limited by their own digital software capabilities, Volkswagen's electric vehicles, including Porsche, do not support the OTA remote upgrade function, although this technology has already been almost standard in China.

This is also reminiscent of Volkswagen's software department CARIAD (unified responsibility for software development within the group), which had to outsource a lot of software development work to a third party due to lack of digital capabilities, but it also lacked the talent to run all modules through the integrated software at the system level, resulting in repeated twists and turns in Volkswagen's software development progress, which greatly affected the listing of many of its electric models.

The weakness of software capability has also led to the postponement of the launch of Porsche's pure electric version of Macan. It was originally scheduled to be released this year and listed next year, but the launch of the pure electric version of Macan was postponed to 2024 because Volkswagen Group software platform development could not be followed up in time.

In addition to software issues, Porsche's performance on the safety of electric vehicles, which has attracted much market attention, has also been disappointing. In 2020, a Porsche Taycan burst into flames in a house in Florida, causing severe damage to the house and car.

In the month when Porsche went public, a Porsche Taycan crashed into a guardrail in Suzhou and caught fire. As the door could not be opened after the accident, two people in the car were killed.

Although almost every electric vehicle company has encountered the accident of collision and spontaneous combustion of electric vehicle, the problem of being unable to open the door after spontaneous combustion is rare. The hidden safety danger caused by this problem is obviously more dangerous than spontaneous combustion.

In addition, for Porsche's spontaneous combustion, some analysts point the problem to the Taycan's own design. In these analyses, although the 800V high-voltage architecture adopted by Taycan has improved the charging speed, it is not as stable as the current more mainstream 400V architecture.

Last year, a Porsche employee revealed that the 800V high-voltage charger currently used by Taycan does not properly control the charging process and may overcharge some batteries, leading to the risk of spontaneous combustion. The employee also revealed that about 60 per cent of the Taycan models that have been delivered have safety risks and may lead to battery charging spontaneous combustion.

In addition to the above problems, problems such as the inability of Taycan windows to rise and fall with one button, abnormal noise of brake pads, slow response of central control, and so on, are also seen on the Internet from time to time.

From the above problems, it is not difficult to find that the challenges faced by Porsche electrified transformation are still arduous.

From the perspective of business history, the prospect of electric transformation of Porsche is not optimistic. Taking an inventory of enterprises that were once brilliant in the past, it is easy to see a phenomenon that once times change, giants can easily fall into silence. Sony, Nokia, Kodak, Panasonic and Sharp are all precedents. Of course, there are special cases like IBM and Samsung.

Will Porsche be a special case? That depends on how it writes the new story of ultra-luxury brands in the new era.

This article comes from the official account of Wechat: ID:lishiqiche2016, author: Zhang Junzhi

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