Another super luxury car brand is about to go public

Under the wave of new energy, the veteran automobile group has also moved frequently and is eager to transform. Thanks to the efforts of Volkswagen Group CEO Herbert Diess, Porsche, which had been glued for several years, was finally put on the agenda. The funds raised by the IPO will be used for investment in Volkswagen's electric vehicles and other vehicles.

On February 22, Volkswagen announced that the board of directors of Volkswagen and Porsche Holdings (SE) has reached a framework agreement to ensure that Porsche (AG) will be listed independently.

This is another super luxury car brand spin-off and listing after Ferrari and Aston Martin.

For the spin-off and listing, Volkswagen has rearranged its equity. Porsche Motors (AG), which was originally 100% owned by Volkswagen, was divided into common and preferred shares (5:5) equally, and up to 25% of the preferred shares were publicly placed, with Porsche Holdings buying 25% plus one ordinary share and Volkswagen holding at least 49% of the shares.

On February 25, Volkswagen Finance Officer Arno Antlitz said Volkswagen would provide an update on the progress and timeline of the listing in the late summer. This means that Porsche may complete its IPO as soon as the fourth quarter of this year.

According to Bloomberg's forecast, if Porsche is successfully listed independently, its valuation may be as high as 60 billion to 85 billion euros (400 billion to 600 billion yuan), which is equivalent to recreating a Volkswagen and may also become the largest IPO in European automotive history.

It is worth noting that Volkswagen will include Porsche in its financial statements through a comprehensive merger, which also means that the valuation of Volkswagen Group will also be greatly improved.

As a well-known luxury brand under Volkswagen, Porsche's luxurious positioning and unique tonality are widely loved by car owners and are Volkswagen's "profit cow".

Volkswagen Group's financial report shows that in the first three quarters of 2021, Porsche sold a total of 209,000 vehicles, accounting for 3.23% of Volkswagen's total; in the same period, Porsche generated a pre-tax profit of 3.4 billion euros, accounting for 34% of the Volkswagen Group's pre-tax earnings.

Hong Sheng, vice president of Porsche China, said that Porsche has always had a very high commitment to profitability, with a return on sales of 15%.

In 2021, Porsche sales exceeded 300,000 units for the first time, of which 95,600 units were delivered in the Chinese market, making it the world's largest single market for seven consecutive years.

Strong premium capabilities and high popularity have made the capital market very optimistic about Porsche's prospects and show considerable interest in its IPO.

Behind the spin-off of Porsche is Volkswagen's positive response to the wave of new energy vehicles.

In the past three years, the trend of new energy vehicles and electric vehicles has become a trend, Musk has used Tesla to become the world's richest man, Wei Xiaoli and other new car-making forces to compete for the lead, Apple, Huawei, Baidu, Xiaomi are also competing to enter the game, and the pace of traditional car groups is generally too slow.

Especially in the Chinese market, in 2021, Volkswagen's annual delivery volume in China was 3.3 million units, down 14% year-on-year; of which only 70,625 new energy vehicles were sold, 80,000-100,000 units lower than its target, and less than Wei Xiaoli.

Instead, Porsche has become the highlight of Volkswagen's electric vehicles. In 2021, the Porsche million-class electric vehicle Taycan delivered 7315 units in the Chinese market, even surpassing the sales of Porsche 911s, and 41296 units were sold worldwide.

Yan Boyu, CEO of Porsche China, said that in the million-level electric vehicle market, Porsche has no competitors.

As CEO of volkswagen group, Diess has been Volkswagen's biggest fan of electrification since taking office. In December 2021, the Volkswagen Group announced plans to invest a total of 159 billion euros over the next five years, of which 89 billion euros will be spent on technologies such as software and electric vehicles, accounting for 56% of the total investment.

Porsche has also been positive on electric vehicles. On February 8, Porsche announced that it will fully shift to electrification over the next 10 years and invest $15 billion in the development of electric vehicles in five years, hoping to generate about one-third of sales from electric vehicles by 2025 and 2/3 from electric vehicles by the end of 2030.

On 21 February, Porsche invested $567 million in a plant in Zuffenhausen to upgrade its production line to increase production of the entry-only evicted models 718Boxster and Cayman.

But Volkswagen's own cash flow is not enough to support such a huge investment, and Volkswagen's shareholders are also very worried about this.

According to the financial report, in 2020, the total revenue of the Volkswagen Group was 222.9 billion euros, down 12% year-on-year; the net profit was 8.82 billion euros, down 37% from the same period in 2019; the third quarter of 2021 showed that the company's revenue for the quarter was 56.93 billion euros, down 4.1% year-on-year, and the adjusted operating profit was 2.8 billion euros, down 12% year-on-year. The company's financial performance is still in decline.

Therefore, the spin-off of the "cash cow" Porsche listing to raise funds, can allow the public to get more cash to support their own electric vehicles, intelligent transformation.

Based on market valuations, placing 25% preferred shares could bring more than €20 billion to the masses.

The Volkswagen Group believes that Porsche's potential IPO will be an important step in Volkswagen's transformation into a vertically integrated mobile group.

Diess said the automotive industry is undergoing fundamental changes. Volkswagen is determined to play a leading role in a world of zero emissions and autonomous driving; the coming years will be clearly focused on advancing into new profit pools, such as batteries and charging, autonomous driving and its own mobile platforms.

Porsche Cars' initial public offering will accelerate this transformation.

Volkswagen spins off high-quality assets to raise funds, which can be described as killing two birds with one stone. On the one hand, it can allow the public to solve the long-standing contradiction between the Piëch family and the Porsche family, on the other hand, it can free up its hands to vigorously develop the new energy industry. The Porsche family and the Piëch family

Obviously, Tesla and Weilai took the lead in rushing into the new world of electric vehicles, so that Volkswagen and other established car manufacturers can not sit still. They have also fully realized that automatic driving and intelligence are unstoppable, and it is necessary to cut into the new energy industry chain.

Volkswagen and Dies' ambitions are not small. Volkswagen was once one of the kings of the automotive industry in the past, and to continue to "play a leading role" in the new world in the future, it is not possible to inherit with a history of nearly a hundred years, and whether it can be stuck and leading in the technology and industrial chain is the key.

After the split, porsche, is it the next Ferrari, or the Traton, or beyond Tesla? In 2022, when the pattern of new energy vehicles is changing, everything is unknown.