Porsche — with CEO Oliver Blume behind the wheel — has achieved a number of milestones in recent years. Its share price is up more than 36% since going public in September 2022 and profit margins are an enviable 18%.
And yet Blume is not satisfied.
“We run the company like a sports team,” Blume said on the sidelines of the company’s 75th anniversary celebrations earlier this month. “After a success, focus [on] what else we can do… go for the next target.”
The next target, Blume said, is 20% margins. The road to it will be paved with investments in new segments and maybe even a seven-figure hypercar.
Time is everything
The past nine months have not been kind to other automakers that went public in recent years, especially companies like Canoo, Fisker, Lucid Motors and Polestar that merged with special acquisition companies. Even Rivian, the 2021 IPO darling that debuted at $78 per share, has seen its price drop by about 82%.
Porsche has managed to avoid a similar fate – a result Blume attributed to years of preparation.
“It was a process of years as we developed the company,” said Blume. “Five years ago, Porsche could never have gone public, and now was the right time.”
That preparation required a renewed focus on the fundamentals: margins, profit and cash flow. But do not think that all this has made the business boring. At Porsche’s 75th birthday party in Stuttgart, Blume unveiled the Mission X, a hypercar designed to be the fastest production car ever made, not the most profitable.
Pushing into the luxury segment
When it comes to growing profit margins, it’s hard to outperform the luxury segment.
While Porsche is certainly a top-notch manufacturer, its reputation is built on performance, not chic. A pivot to challenge brands like Mercedes-Benz or Rolls-Royce should not be taken lightly.
“Before we decide to move into a new segment, we do a thorough analysis of the markets, of the profit pools and different regions of the world, and we think that the segment of luxury SUVs is quite large, and with very strong development potential from the future and strong profit margins. What’s missing is a very sporty one there,” Blume said.
In other words, buyers have many luxurious and stylish options in the premium SUV segment, but none have the character of a Porsche.
Learning from the Cayenne
It’s a similar story to what drove Porsche to introduce the Cayenne SUV 20 years ago. While not particularly luxurious, the long, big and wide Cayenne represented a huge departure from the company’s pure-sport offerings.
Cayenne sparked controversy, with many brand purists saying Porsche had lost its way. Far from the beginning of the end, Cayenne is now the best-selling Porsche, while the company’s portfolio of fast, desirable sports cars is broader than ever.
Going to green pastures saw Porsche find huge success, and now Blume hopes to do so again.
That next expansion is a new SUV that Blume referred to by its codename: K1. First mentioned in March and due out in 2027, this new SUV will be larger than the Cayenne. It will also be fast, but the focus here is on luxury.
Performance will come from an all-electric powertrain, Blume said, in line with Porsche’s goal of delivering 80% electric cars by 2030. The appearance and layout of the car may be a little unfamiliar. “You’ll be surprised by the design,” Blume said.
Blume also said the K1’s systems and software, the car’s “technology profile,” will be unique.
Wanted: software engineers
To create innovative technologies found only in Porsches, the company is hiring — a notable departure from an industry that lays off workers.
Porsche has more than 1,000 technical job openings, many of them on the software side. Blume said this is becoming an increasingly important part of the company’s identity: “We think the IP we’re developing is very specific,” Blume said. “100% of this kind of cost is important for our brand identity and for our product identities. That is our core business.”
For Blume, this clarifies the build versus buy debate.
“You can buy solutions into the market in areas that are not your core business… And so it’s very clear to us where we can tap into that focus, where we’ll source the best talent from the market to develop our core competencies, ” he said. “And in other areas, where it’s not that important…we’ll work with partners, but they’re the best partners in the market.”
When it comes to that core experience, Blume said, “All the touch and feel and the coming about of the software experience in the car should be unique to Porsche.”
Bringing a luxury all-electric SUV – catnip to US buyers – may make financial sense. However, for extremely small hypercars (Porsche only sold 918 of the 918 Spyder), the value proposition is often a bit more vague.
Blume cited the brand-building impact of a record-breaking halo car like the Mission X: “All of our hypercars are icons,” he said. But there are also more tangible benefits. “In the hypercars, we show the best that the company can develop, produce, show what our technologies are [are] for the future. We will bring later [them] to other series cars, and so it’s not just a showcase, it’s real life, to bring innovations, to develop innovations,” he said. “The whole team is focused, motivated and driven to develop a hypercar , and that’s the best the company can deliver.”
Mission X: to be or not to be?
Blume repeatedly declined to specify whether or not the Mission X would be produced, but we wouldn’t have to wait long to find out.
He said the decision will be made “over the course of next month”. If given the green light, his first official task will be to recapture the fastest lap record by a production car around the Nürburgring Nordschleife. For Blume, that iconic 20-kilometer race track through the forests of West Germany is part of Porsche’s DNA: “When we design and build the concept of a car, the Nürburgring Nordschleife is the benchmark for Porsche.”
Porsche’s last hypercar, the 2013 918 Spyder, itself set the fastest lap time for a production car, with a time of 6:57. The current record, set by the $2.7 million Mercedes-AMG One, stands at 6:35. That will probably be the goal for the Mission X, the existential purpose for a car built by an almost eighty-year-old company that still intends to prove its mettle on the track.