Porsche holds tight to its high profit margin image

With more demanding emission levels, Porsche’s high profit margins may slip in the near future, but the premium brand said it was committed to keep it steady.

Porsche is the most profitable business in the automotive industry and the Volkswagen Group would be in serious trouble right now without the brand which makes the iconic 911 sports car. Porsche has the highest profit margins within the industry and it manages to keep it that way year after year. However, it will prove a challenging task in the future, as harsher carbon dioxide emission laws will mean more money spent in development and higher price tags for its upcoming models. “The 15 percent profit margin is a sacred cow here at Porsche. We won’t give it up,” Porsche finance chief Lutz Meschke told Automotive News Europe. But adding a plug-in powertrain to its 911 model will mean rising its price with around 10,000 euros (11,300 dollars), Meschke estimates, and the loyal and wealthy fans of the brand may not be willing to pay such an increase. In other words, the margins will be reduced every time the brand sells a plug-in hybrid.

And there are more investments to come while Porsche cautions its investors against “exaggerated expectations” for bigger profits as it has to brace itself for putting around 1 billion euros (1.13 billion dollars) in the first purely battery-electric model, the Mission E. However, the company still expects to meet its 15 percent operating profit margin target in 2016 after achieving 16 percent last year, when it also managed to achieve its most successful fiscal year in the company’s history.

Via Automotive News