Author | Zhu Ming
Edit | Tang Fei
There is an interesting phenomenon in China’s automobile industry: independent brands are going up and joint venture brands are going down.
With the continuous efforts of BYD, Weixiaoli and other automobile brands, the sales of domestic cars have soared, and the prices have also been continuously explored. According to the latest data of the Federation, in December 2023, the retail volume of independent brands was 1.24 million, a year-on-year increase of 17%.
On the other hand, the domestic prices and sales of foreign automobile brands have declined. In December 2023, the retail volume of mainstream joint venture automobile brands was 790,000 vehicles, down 7% year-on-year.
It is particularly worth mentioning that Porsche, which used to have a luxury car aura, suffered from Waterloo in China.
On January 12th, Porsche released data showing that in 2023, 320,000 vehicles were delivered globally, up by 3% year-on-year, and 79,300 vehicles were delivered in China market, down by 15% year-on-year. Moreover, the China market has become the only single market for Porsche’s sales decline.
Many players in the domestic automobile market are scrambling to attract consumers, and the competition is becoming more and more fierce. In this situation, why did Porsche, which had a brand advantage before, turn around?
Rich people in China don’t buy Porsche.
2023 is a glorious year for China automobile market.
According to the latest data released by the Federation of Passenger Cars, the cumulative sales of domestic passenger cars in 2023 was 21.699 million, a year-on-year increase of 5.6%. At the same time, the high-end market has also performed very well. In 2023, the sales volume of domestic high-end brand passenger cars was 4.516 million, a year-on-year increase of 15.4%, which was 11.2 percentage points higher than the overall sales growth rate of domestic passenger cars.
This booming scene is in stark contrast to the desolate atmosphere of Porsche’s sharp decline in sales.
In fact, Porsche has high-light moments in China. In 2001, Porsche entered the China market. In 2015, China market became the largest single market of Porsche in the world, and reached a record high in sales volume in 2021. At that time, Porsche had refreshed its sales performance in China for 20 consecutive years.
Relevant data show that the sales volume of Porsche in China market from 2015 to 2021 was 58,000, 65,200, 71,500, 80,100, 86,800, 89,000 and 95,700 respectively.
Porsche’s sales are rising steadily, which is inseparable from its positioning.
From the positioning point of view, Porsche is more advanced than BBA, but it is not as good as ultra-luxury cars such as Bentley and aston martin. For example, Porsche 718 is an entry-level sports car owned by Porsche, which can be won at a price of more than 500,000 yuan.
Therefore, Porsche is loved by the original BBA owners and has become one of their consumption upgrade options. Porsche has stated in its prospectus that its sales growth in China over the years is mainly driven by more and more high-net-worth individuals, including more and more women and millennials. By 2022, half the owners of Porsche China are women, with an average age of no more than 40, and the average annual family income is about 410,000 euros (about 3.04 million yuan).
However, in 2022, Porsche’s sales in the China market fell for the first time, down 2.5% year-on-year. In 2023, this downward trend continues.
Not only the sales volume, but also the price.
In the past, Porsche’s popular models needed to be bought at a higher price. However, in 2023, these popular models began to reduce prices. For example, Porsche 911 can offer a maximum discount of 4%, Panamera can give more than 10% price reduction space, and Macan can even give more than 20% price concession space.
Even if the price reduction space is so large, Porsche sales are still not mentioned. Part of the reason is that under the sharp price reduction, consumers have the psychology of "buying up and not buying down" for the sake of maintaining value.
911 Carrera。 Source: Porsche official website
In the used car market, Porsche was once the most "anti-falling" luxury model, but now it is also "falling endlessly". For example, a Porsche Macan with a landing price of 698,000 yuan in 2019 has a mileage of about 50,000 kilometers, and second-hand car dealers in some cities directly quote 300,000 yuan. Overall, Porsche’s hedge ratio has fallen to 81.71% in the third quarter of 2023, which is nearly 3% lower than the previous quarter.
Porsche is being abandoned by the new energy era.
There is a popular saying on the Internet, "A person’s destiny depends on self-struggle, of course, but also on the historical journey".
This sentence also applies to car brands. Whether standing on the top of the tide or walking down from a height, it is inseparable from the dual role of the brand itself and the tide of the times. Porsche lost its customers in China because of these two reasons.
The wave of new energy vehicles is coming, which has a tendency to overwhelm fuel vehicles. In 2023, the cumulative retail sales of new energy vehicles in China reached 7.736 million, a year-on-year increase of 36.2%.
Almost all car companies believe that the new market volume exists in the new energy era.
Many domestic automobile brands, such as BYD, Weilai and Krypton, ride the east wind of new energy and stand above the tide. At the same time, these brands are still jumping upwards. For example, BYD looks up to U6, Haobo SSR, Weilai ET9, and Extreme Krypton 001FR, which are approaching or even exceeding one million in price, pointing to the luxury market where Porsche is located.
Some car owners in China joked that "if you don’t work hard, you can only drive BBA".
However, Porsche has few new moves in the field of new energy vehicles, and its product line is relatively weak. At present, Porsche only has Taycan, a mass-produced pure electric vehicle, and products such as Cayenne and Panemera are still in the plug-in hybrid stage. On the whole, the breadth and depth of Porsche’s new energy vehicle layout are not enough, which will bring a serious problem-the brand effect is weakened.
Taycan GTS。 Source: Porsche official website
In the era of fuel vehicles, Porsche’s brand premium is mainly reflected in its leading performance. However, in the era of new energy vehicles, the performance gap between automobile brands is narrowing, and Porsche’s performance advantage is shaken, which will make some consumers switch to other brands. After 2021, the delivery volume of Taycan in China has gradually declined. In March 2023, Taycan sold 308 vehicles a month, and in July, the sales volume dropped to 275 vehicles.
In addition to the new energy product line, other Porsche products are in the window of upgrading, which further affects the sales growth.
Porsche’s two best-selling models in China, Panamera and Macan, have not been updated for at least six years. Michael Kirsch, President and CEO of Porsche China, admitted in the financial report that the cayenne, the most popular model of Porsche in China, will face the switch between the old and new models in 2023, which will drag down the sales in China.
In addition, Porsche’s own quality and service problems are also affecting its sales. Among the complaints about black cats, there were 1071 complaints about Porsche, and some consumers complained about their after-sales service and product quality. In 2022, the "reduced distribution door" incident and frequent recalls also dealt a blow to its brand image and reputation.
You know, consumers often have higher requirements and expectations for high-end car brands. If there is a problem with a product or service, it will spread faster in today’s social media era, which will have a greater impact on word of mouth and sales.
How to attract consumers again?
In the fiercely competitive automobile industry in China, players from all walks of life are constantly emerging and the supply is abundant. In fact, the market balance has shifted from manufacturers to consumers, thus entering the era of consumer sovereignty.
As early as 1935, Hayek, the Nobel laureate in economics, put forward the theory of "consumer sovereignty". In the era of extremely rich materials, consumers have further control over "sovereignty", and what and how much enterprises produce should be determined by consumers’ wishes and preferences.
Nowadays, the car brands that are killing in China should also anchor the needs of users. In terms of understanding and meeting users’ needs, China automobile brands have an advantage, so the road to rise is relatively smooth. For example, Weilai’s service has won the favor of high-net-worth people, and its ideal meets the family needs of the domestic middle class, thus gaining preference. At the same time, domestic car companies are also more willing to listen to consumer suggestions. Recently, Xiaomi Automobile has modified the tail label according to user feedback, which is a typical example.
For Porsche, under the double pressure of external environment and its own reasons, it is actually a two-step process to attract the attention of China consumers again.
First of all, it is necessary to speed up the layout of new energy vehicles.
McKinsey predicts that pure electric vehicles will dominate all luxury car segments by 2031.
According to Porsche’s plan, more than 50% of the new cars delivered by 2025 will be electric vehicles; By 2030, more than 80% of the new cars delivered will be pure electric vehicles. This progress is not fast, and it is even slow compared with the "transformation" of BYD and other car companies.
Macan。 Source: Porsche official website
Secondly, under the wave of new energy vehicles, we should firmly anchor consumer demand. Nowadays, the two core needs of consumers of new energy vehicles are intelligence and energy supplement.
People in the automobile circle have reached a consensus that the second half of new energy vehicles will be intelligent. The car is no longer a simple means of transportation, but a mobile intelligent terminal. According to the statistics of the National Development and Reform Commission, the penetration rate of smart cars in China will reach 82% in 2025 and 95% in 2030.
In the era of fuel vehicles, Porsche achieved a brand premium by virtue of its leading engine performance. In the current era of new energy vehicles, it is more urgent to satisfy consumers’ intelligent experience.
In addition to intelligence, consumers of new energy vehicles in China pay special attention to energy supplement.
According to the data of the Ministry of Industry and Information Technology, the ratio of vehicles to piles of new energy vehicles in China will be about 2.7:1 in 2022. This is still far from its previous goal of "achieving a ratio of vehicles to piles of 2:1 in 2025".
Many China car owners have endurance anxiety, so if car companies have a better charging network, they will undoubtedly gain more favor. Recently, in response to the anxiety of car owners in China, Mercedes-Benz and BMW announced that they would jointly build a super charging network in the China market. According to the plan, the joint venture company will build at least 1,000 super charging stations in China by the end of 2026.
At present, Porsche has set up 338 charging piles in more than 90 cities across the country, but it is still not enough. Next, how to build a larger energy-supplementing network through multi-party cooperation is what Porsche needs to do.
At present, the automobile market in China is in a period of reshaping the changeable pattern, and overtaking in corners and neglect of falling behind occur simultaneously.
High-end brands that are popular in the era of fuel vehicles can’t always lie on the credit book and sleep, otherwise they will be abandoned by consumers. Accurate insight into the needs of consumers and deeper satisfaction of their needs are the long-term survival ways of automobile brands.
* This article is written on the basis of public information, only for information exchange, and does not constitute any investment advice.
