…and Porsche is getting it!
Good for them!!
Given the starting Porsche price of about $47K to $200K plus, the average price must be about $100K so a margin of 17.3% is pretty good by car standards. Lousy by iPhone standards, they get about 69% to 200% profit on each iPhone depending on who you ask.
Yep but going back to Bruce Williams again, is it better to have $3000 on 500,000 cars?
Porsche makes a good quality product, and quality sells, especially to the right customer; i.e. one with plenty of disposable income. Reminds me, there’s a pretty good car related movie from the 60’s titled “The Yellow Rolls Royce” and in one scene the customer who’s buying it at the dealership showroom is annoyed b/c the salesman keeps talking about the technical details of the engine. "6 cylinder, 4 1/2 inch bore … blah blah blah … " … lol… The customer is more interested in which side the telephone is on. Finally the customer says “I’ll buy it”, then says to the salesman : " I don’t want to seem disinterested in your enthusiasm for the engine on this marvelous vehicle, but it is a Rolls after all? I have to presume it goes ok. "
No, I don’t think so. $3000 on mass market cars, the average car sold now is $33,600, is only 8.9% profit before taxes and roughly 6% taxes. An OK return but not a great return. Probably better than GM and Ford get right now. Porsche makes a higher margin on lower volumes because it is somewhat exclusive much like Ferrari.
Hard to get investors excited about launching a new car company with all the risk with such a low return. It’s OK for investors in old-line, established companies like Ford or GM but it won’t generate the potential upside like a Tesla. That is the real barrier to launching a brand new car company that just makes mass market cars without some real market distinction.
Assuming the company makes the same magnitude of profit in either scenario, I would choose the path with fewer units. It has less risk overall to profitability for things like; warranty expense, material scrap (E&O) due to required mid-stream changes to fix issues and so on.