Porsche has no intention of reducing its 15 percent operating margin profitability target despite the heavy investments needed in EVs. Finance chief Lutz Meschke said Porsche will overcome the "enormous burden" of electrifying its lineup and will also set the standard in e-mobility. He explained how in a recent interview with Automotive News Europe Correspondent Christiaan Hetzner.
Will electric vehicles be bad for Porsche's profitability?
Today Porsche packs 8,000 to 10,000 euros in added content into an electrified vehicle, but those costs cannot be passed on via the price. The customer won't accept it, just the opposite, in some parts of the world there's a certain hesitation [to acceptance]. But new technologies like this are an investment in the future. At the moment, we have to develop combustion powertrains in parallel, so we have a higher expenditure without the corresponding volume.
What will this cost you?
Our five-year investment plan foresees investments of more than 3 billion euros alone for EVs and plug-ins. That’s an enormous burden for a company of our size.
Does that mean the company will face some tough years?
To protect your margin, you have to look at substantial fixed cost cuts, but there's only so much potential since the biggest chunks are personnel and development. As sales shift toward EVs, a temporary drop in profitability in the midterm may be expected.
Porsche's profit margin is 15 percent now and that is also your target for the future. Should you lower it?
It's a strategic target. We need to structure the company so that it is in position to sustainably achieve that. There can always be years when it might drop to below 15 percent due to exchange rates or an economic crisis, but every worker has to know we are not letting up.
Would setting an EBIT range of, for example, 10 percent to 15 percent be more appropriate?
We already work with ranges for our capex and r&d ratios, but it's better for Porsche to work with a fixed margin target. We attach incentives for the average worker to it, and there's even a pension component. It's really an internal steering instrument. That's why everyone in the company from the manager to the assembly line worker knows the goal is 15 percent. If we work with a range, that effect is diluted.