The Porsche logo at the Paris auto show, on Oct. 3, 2018.BENOIT TESSIER/Reuters
To Ferrari disciples, the new Ferrari Purosangue – Italian for “pure blood” – is a rolling sin. They say there is nothing “pure” about the machine, the company’s first four-door with high ground clearance. An SUV, in other words. Yes, Ferrari is no longer exclusively a builder of sleek, sinuous sports cars that make enthusiasts go weak at the knees with desire.
But to Ferrari investors, the Purosangue, which was unveiled last week by the Italian manufacturer, may be a godsend. They see how high-performance, luxury SUVs have transformed Germany’s Porsche into the Rolex of automakers and they want a bit of that financial magic.
At the same time, Porsche has been coveting a bit of Ferrari’s magic. It plans to join the stock market through an initial public offering – just like Ferrari did in 2015, to great success. Since then, Ferrari’s value has climbed from US$10-billion to about US$38-billion, even though it makes fewer than 12,000 cars a year. Its profit margins are lavish.
The Porsche IPO should happen in the next couple of weeks, even though the war in Ukraine and the energy crisis it triggered have put investors everywhere on edge. But just as there was no stopping the development of the Ferrari SUV, there is no stopping the Porsche IPO. By every measure, it should be a blockbuster, a deal that should raise the equivalent of about US$19-billion, bringing the company’s valuation to almost US$75-billion. It will be Europe’s biggest IPO in more than a decade and stands to fortify Porsche’s status as the premier maker of sports cars and sporty SUVs.
Ferrari, a niche maker of ultraexpensive cars, will be fine. It is Tesla that should be looking in its rear-view mirror.
Porsche is moving into its territory. Already, fully electric cars make up 13 per cent of the company’s sales, and the Porsche Taycan is outselling the top-end Tesla, the Model S, by 2-1. The Taycan is even selling as well as the venerable Porsche 911, the rear-engine thoroughbred that put Porsche on the hot sports-car map in the 1960s (well more than a million have been sold).
As a stand-alone company with its own stock market listing, hefty profits, and formidable engineering and manufacturing power, Porsche could displace Tesla at the top end of the electric-car market.
Porsche is owned by Volkswagen, the world’s second-biggest automaker when measured by sales volumes. It is the most valuable division of the German giant, whose portfolio also includes Audi, Skoda, Lamborghini and Bentley, as well as Ducati motorcycles, and makes about 300,000 cars a year – 25 times as many as Ferrari.
The IPO is complicated, given Volkswagen’s complex ownership structure. The Porsche and Piëch families own 53 per cent of Volkswagen’s voting shares through their publicly listed holding company, Porsche Automobil Holding SE. Volkswagen in turn owns Porsche – the larger company bought the sports-car maker through a reverse takeover in 2012 and merged the two operations.
The IPO will list only 25 per cent of Porsche’s preferred shares, which have no voting rights. The Porsche and Piëch families, through their holding company, will receive 25 per cent of the common shares, which do have voting rights, plus one additional share, which will give them a blocking minority stake. In the end, investors will own just 12.5 per cent of Porsche’s capital and have little say over the company.
In essence, the new Porsche, while technically an independent company, will remain in the family fold – and it is hard to see that ever changing, given their long love affair with Porsche. To further complicate the ownership structure, Oliver Blume, a Volkswagen insider since 1994, will be the boss of both Porsche and Volkswagen.
Post-IPO, Porsche will never be as profitable as Ferrari, based on margins. Ferraris are one of the ultimate status symbols, and the cars are twice as expensive as high-end Porsches. The motoring press is guessing the Purosangue will cost US$350,000. No surprise that Ferrari’s profit margin was 25 per cent in 2021. Porsche has said it is targeting a margin of 17 per cent to 19 per cent in the medium term, which means it will trade at a hefty discount to Ferrari.
But that is not the point. The point is that the new Porsche will still make a huge amount of money, given its high production rate, global brand value, superb engineering skills, economies of scale, ability to poach dazzling technology such as gearboxes from brands within the Volkswagen group, and relatively robust supply chains.
In short, it will have the financial might and skills to go after Tesla, the one automaker that still trades at eye-popping multiples and is worth almost US$1-trillion – more than 10 times Volkswagen’s value. Porsche is already an electric-vehicle star, well ahead of Volkswagen on this front. It more than doubled its EV sales in 2021 and wants EVs to make up half its sales by 2025 – 80 per cent by 2030.
If there is one legacy car company that can make a quick move to electrification, it is Porsche. As it switches off its internal combustion engines, its value will inevitably rise, giving it the resources to speed up the transformation. Ferrari will always be the ultimate toy for millionaire and billionaire car nuts, but Porsche could become Germany’s answer to Tesla.