As the old Chinese saying goes, "If the sky wants to die, it will make it crazy". Porsche, the world's best-selling ultra-luxury brand, is in such a state, thinking that it has the whole world, but in fact it is terminally ill and returning to the light.
Porsche's disease is characterized by the collapse of the Chinese market; the disease lies in the backward product technology and being beaten by rising stars; and the root cause of the disease that really penetrates into the bone marrow lies in the qualitative change in the logic of user consumption and the collapse of Porsche's brand belief.
According to Porsche's latest 2023 financial report, Porsche's operating income climbed to 40.5 billion euros, up 7.7 percent year-on-year, sales profit increased by 7.6 percent year-on-year to 7.3 billion euros, and net cash flow from the automotive business was 3.973 billion euros. In terms of deliveries, Porsche will deliver 320,200 vehicles worldwide in 2023, a year-on-year increase of 3%.
However, the Chinese market was the only exception in the overall performance, with deliveries down 15% year-on-year. This is also the second consecutive year that Porsche's sales in the Chinese market have declined.
How important is China? Over the past eight years, China has been Porsche's largest single market, accounting for 32 percent of global deliveries, equivalent to one out of every three Porsche sold in China. But in 2023, that number has slipped to 25%, and the largest market has become North America.
Porsche's explanation is that the consumption capacity of the Chinese market needs to recover after the epidemic, and at the same time, Porsche has "adjusted the supply of products in China and adjusted it to the global market". Is that really the case?
In the past two years, the sales of luxury passenger cars in mainland China have grown rapidly, outperforming the market, and the share of luxury brands in the passenger car market has also further expanded, reaching 22.9% last year. If you look at the price, the passenger car market of more than 500,000 yuan also remains highly stable, with an average monthly sales of 5~60,000 units.
According to the "2023 China Private Wealth Report" released by China Merchants Bank, the number of high-net-worth individuals in China will reach 3.16 million in 2022, of which 49% are under the age of 40, an increase of 7 percentage points compared with 2021. The report judges that in the next two years, the number of high-net-worth individuals and their assets in China will continue to grow at a compound growth rate of 11% and 12% respectively, and there will be nearly 5 million multimillionaires in China by 2024.
The prospectus of Porsche's IPO clearly states that the growth of the Chinese market is mainly driven by the growth of high-net-worth individuals, including more and more women and millennials (those born in 1980~1995). It can be seen that it is not that the Chinese people have no money to buy luxury cars, but that the target users of Porsche have abandoned it.
On the one hand, in the era of smart electronics, technological changes and disruptive products of new brands are rapidly diverting the attention of high-net-worth individuals, promoting a comprehensive reshuffle of the originally solidified luxury car market.
Needless to say, Tesla and Weilai have entered the market of more than 500,000 yuan, and the price of ZEEKR 001 FR is 76.9 yuan, setting a benchmark for performance cars in the electric era, and even breaking through the price ceiling of 1 million yuan...... They have become rising stars in the segment.
In contrast, the Porsche Macan, which was ranked second in the sales list of luxury cars of more than 500,000 yuan four years ago, has now slipped to ninth. The Taycan, which pioneered pure electric vehicles for Porsche, has also been declining since its launch in China, with deliveries gradually dropping from about 7,300 units in 2021 to about 4,200 units last year.
The analysis points out that Porsche has now shown signs of "hollowing out" - only the brand premium, and those track glories are still in the era of fuel vehicles.
The horsepower that the brand is proud of has become cheaper, the powertrain matching trick has been abandoned, and mechanical capabilities such as chassis suspension tuning are being replaced by electronic controls, even for Porsche itself. Neither the transparent chassis nor the variable stiffness suspension can continue to be the moat of the brand. It turns out that only luxury cars are equipped with three-chamber air suspension, which has also been successfully tackled by Chinese suppliers and delegated to 200,000 yuan products. In addition, in China's new energy vehicle market, the research and development cycle of new models has been shortened to 24 months.
In this way, Porsche's weaknesses such as slow product iteration, software crotch pulling, and intelligent driving failing to catch up with the leading level are magnified. Although some people will say that ultra-luxury brands cannot compete with the new speed of mass brands, some people will say that people who buy Porsche do not care about intelligence, they enjoy the fun of driving. But I believe that Porsche owners who have spent millions of dollars are surpassed by Xiaomi SU7 when accelerating in a straight line, and when they are robbed of the topic by Xiaomi SU7 in social occasions, the shadow area in their hearts must be not small.
On the other hand, and the most fatal point for Porsche, the younger generation is no longer a fan of the halo of luxury brands. They are self-confident and pragmatic, more self-conscious, willing to explore and have the courage to try new things. Due to the large number of novelties in front of them every day, the younger generation has a weak perception of brand loyalty, and looking for content communities on social media to actively share and respond to has become a new way for users to perceive brands. The new forces, Huawei, and Xiaomi took control of this new way of playing and slipped into the air.
On the other hand, Porsche, the content that can cause responses on social media is "718's micro-business car pick-up photo", "Porsche's arrogance in sales", and "the value of all plastic and skinless in the car", which shows that although Porsche wants to be a mass brand in the ultra-luxury market, it continues to be high and completely "lying flat" in user operation, but it does not know that the love of new users needs to be ignited, and it also needs to be heated repeatedly.
Porsche is probably not aware of its danger anymore, judging from the return on sales of up to 18% in 2023, Porsche's decline in China will not affect its profitability at all; Blume, CEO of Porsche, confidently said that "the increase in sales in other markets around the world can make up for the decline in the Chinese market" and that "the expectation for the Chinese market in 2024 is that quality is greater than quantity".
But the arrogant old luxury car company ignores that China is no longer a follower of the global car market, but a bellwether for future consumer trends, and that the loosening of the Chinese market means a loosening of Porsche's prospects.
According to the author's understanding, there are already owners of Porsche 718 and 911, after test driving Xiaomi SU7, directly gave up the plan to buy Paramela, and instead placed an order for Xiaomi SU7, because the latter felt that the latter was "better to drive"; Although these stories are still an example, if you go back 5 years, who can believe that a Chinese brand that started by selling affordable mobile phones can steal the limelight from Porsche.
The capital markets have the sharpest sense of smell, and Porsche attracted investors with a long-term return on sales of more than 20% before the IPO, but with the "decline" of the Chinese market, everyone began to doubt whether this promise could be realized.
As a result, investors voted with their feet, and Porsche's share price corrected significantly, from a high of 118.9 euros in May last year to a low of 72.28 euros in January this year. Today's market value of 42.5 billion euros is not small from the peak of more than 54 billion.
In stark contrast, Lotus, which is the first to take all in intelligent electrification and understands Chinese users better, has received an olive branch from LVMH and successfully landed on the NASDAQ and won the title of "the world's first electric sports car stock". Its value is rapidly emerging, and it is expected to become a new leader in global supercars in the future.
Chinese people understand the truth that a spark can start a prairie fire, and in history, there is no shortage of examples of the change of times and the collapse of behemoths. Ironically, the parties often can't tell whether the "halo of the protagonist" or "the return to the light" is on the top of their heads.