Over the past few days, there’s been a lot of buzz about Porsche dealers, so let’s dive into the data.
In 2023, China saw 26 million passenger cars sold, with Porsche contributing 79,000 units. In the grand scheme of things, this is quite minor, which fits Porsche’s role as a luxury import brand.
In contrast, the U.S. had 15.5 million passenger car sales in 2023, with Porsche selling 86,000 units. While the proportion is slightly higher than in China, Porsche still maintains its status as an imported luxury car.
Interestingly, the U.S. has been Porsche’s largest market for decades. However, in 2013, China surpassed the U.S. due to the Chinese market’s love for SUVs, making the Cayenne the best-selling Porsche model, with the Macan further reinforcing SUV popularity. That year, China’s GDP growth rate was 7.7%. While Americans also love SUVs, they have a higher proportion of sports cars. Ten years later, in 2023, China became the only market where Porsche’s sales dropped, and the U.S. reclaimed its position as Porsche’s largest market.
The decline in Porsche’s sales in China is a complex issue. Some point to the product itself. The rise of Chinese cars and brands has significantly impacted all joint venture and foreign brands, an irreversible trend. In developed automotive markets, local car brands generally capture over 80% of the market. This is true for the U.S., Japan, Germany, South Korea, and France. The share of Chinese brands will continue to grow. However, it’s worth noting that Porsche is not a mass-market brand in any country; it sits above BMW, Benz, and Audi (BBA) and local brands as a premium brand, aiming for a small market segment.
From a product perspective, Porsche’s electric vehicles were early adopters of 800V systems and hold the fastest lap record at the Nürburgring. These achievements are impressive for a brand focused on sports cars. The Taycan’s global sales rose by 17% last year. However, in China, the pricing for electric vehicles has been disrupted, and the pricing logic for gasoline vehicles has failed. It’s impossible for one or two brands to maintain the old gasoline vehicle pricing logic. Therefore, Porsche needs to respect the Chinese market’s pricing and its competitors. Additionally, Porsche underestimated how quickly the market and environment would change. Fluctuations in the stock market and real estate have significantly affected potential buyers, who were previously the main buyers of Porsche, upgrading from BBA. This situation has even affected the ultra-luxury segment, with Ferrari, Lamborghini, Bentley, and Rolls-Royce all seeing declines in sales in China last year. In the U.S., you have to pay a premium for a 911, but in China, you can get a discount. For manufacturers, the easy days of making money are over. This applies to imported, joint venture, and domestic brands alike. Manufacturers and dealers need to understand the situation and develop reasonable sales strategies and targets.
Despite these challenges, Porsche remains highly profitable, a lesson many manufacturers can learn from. Sales volume is important, but profit is even more crucial. Two automotive groups considered failures in China are Stellantis and Hyundai. Despite their high profits, they haven’t performed well in China. From our perspective, such companies would have gone bankrupt long ago, but they’re still thriving.
Chinese manufacturers have changed many rules and will face similar challenges in the future. We hope they continue to improve.
