Porsche has ruled out building a factory in China, its largest and most profitable market, despite struggling to ship enough German-made sports cars to meet a surge in Asian demand at the end of last year.
“It is a quality and a premium argument still to produce from Europe for China,” chief executive Oliver Blume told the Financial Times. “Today it doesn’t make any sense [to move production].”
Blume’s position stands in sharp contrast to other premium German brands, including Audi, BMW and Mercedes, that increasingly manufacture cars for the Chinese market locally, often through joint ventures.
Last year, Daimler boss Ola Kallenius told the FT that the Stuttgart-based company would no longer expand its production in Germany, where labour costs are high, and would invest in China instead.
But Blume, who also sits on the board of Porsche’s parent company Volkswagen, said it was worth absorbing higher costs for the cachet of the “Made in Germany” brand.
“That’s also the feedback we got from our dealerships and from our customers,” he said.
Porsche, which accounts for about 40 per cent of VW Group’s annual profits, is increasingly reliant on China.
“It was only 10 years ago when Porsche was selling less than 100,000 units globally,” said Arndt Ellinghorst, an analyst at Bernstein. “It now sells nearly 90,000 units in China alone.”
The country, which accounts for about a third of Porsche’s sales, was the only big market in which the company registered growth during a pandemic-ravaged 2020.
But while the Stuttgart-based carmaker’s sales in China grew by 3 per cent last year, sister brand Audi enjoyed a 5.4 per cent rise, while BMW delivered 7.4 per cent more cars and Mercedes 11.7 per cent.
“The premium market was developing much quicker [than expected in China] and we weren't able to to follow because 100 per cent of our production comes from Europe,” Blume explained.
But, he said, as a result Porsche was able to maintain more stable prices, while rivals with production sites in China offered heavy discounts to incentivise sales.
The former engineer also said Porsche, which has six model ranges and sold 272,000 cars in total last year, did not have sufficient volumes to justify localising production in China.
While Porsche does manufacture one of its models in Slovakia, the company’s electric ambitions are firmly rooted in Germany.
Its Porsche Taycan — designed to compete with Tesla’s Model S — is produced in the same factory as its emblematic 911 model at company headquarters in Zuffenhausen, a northern district of Stuttgart.
Blume said this decision sent a “strong signal” to customers that the car, which sold 20,000 units last year, was “engineered and made in Germany”.
However, while he maintained that a European base was a “win-win situation” for Porsche and a “strong signal for investment” in the region, he said market forces could change the group’s global footprint in the future.
“In 10 years, I don't know,” he said. “It depends a lot on how volume develops and also the regulations in each country.”
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February 14, 2021 at 12:01PM
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Porsche rules out Chinese factory as it hails cachet of ‘Made in Germany’ - Financial Times
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