The most profitable car launched in the past year was not a Tesla. Nor was it some crazy hypercar. It was the new Porsche 911.
The eighth generation of Porsche's iconic car, known internally and to Porsche faithful as the 992, is more profitable, proportionately speaking, than any other vehicle that debuted in the past year.
The 911 has accounted for nearly 30 percent of total Porsche earnings since it launched, even though it made up only 11 percent of sales, according to a recent report by Bloomberg Intelligence.
That percentage beats elite models such as the Ferrari F8 Tributo, Aston Martin DBX, Mercedes-Benz GLE, and BMW X5, each of which also punch above their weight when it comes to profit margins.
The F8 Tributo, for example, has a 50 percent sales margin but contributes just 17 percent of total vehicle earnings at Ferrari. Aston Martin will sell an anticipated 4,500 units of its DBX in 2020, doubling sales volumes and singlehandedly accounting for 21 percent of total vehicle contribution at the UK sports-car maker. The DBX likely to push Aston Martin Ebitda margins to 30 percent, according to the report.
As for the SUVs, the GLE, together with its GLS sibling, will account for 24 percent of earnings at Mercedes in 2020, from just 9 percent of total volume; the BMW X5 will account for 16 percent of auto earnings, with just 7 percent of BMW's volume.
All these models generate "a disproportionately high level of overall earnings," said Michael Dean, automotive equity research analyst for Bloomberg Intelligence.
The recently introduced next-generation 911 in particular will enhance gains even more for Porsche, which is owned by Volkswagen Group.
"It's a very simple calculation: The 911 is very profitable in its own form, and when you add the variations, the margins became immense," Dean said.
He said automakers use lucrative options such as ceramic brakes and turbocharging variants to increase the base suggested retail prices without incurring much additional cost themselves. It also helps that the new 911 has a higher list price, $97,400 in the U.S., than the already strongly profitable previous generation.
Beyond that, the addition of the Turbo variant "is basically pure profit," Dean said. "If you assume they sell 10,000 Turbos anyway, plus GT3 and Turbo S's, just the Turbo variants of the 911 alone could actually mean half a billion dollars in terms of profit for Porsche."
With its biggest market in China and its upper-crust price bracket, Porsche should also remain unaffected by the woes currently affecting German automakers, Dean said.
Car sales in Germany are at their lowest since 2010 as Mercedes-Benz and BMW face trade wars, slowing economies, and lingering pollution concerns intensified by Volkswagen's 2015 diesel scandal.
"There is no issue there," Dean said. "Porsche is ahead of the game."
In 2018, Porsche's global vehicle sales rose 3 percent to 256,255, while the 911 in particular saw a double-digit rise in deliveries of 10 percent to 35,573 despite the model being on its run-out year before the 992 was introduced.
Global sales of Porsche 911s in 2018 alone exceeded those of all cars from Bentley, Ferrari, Aston Martin, and Lamborghini combined.
"The 911 capacity to fascinate is stronger than ever," said Porsche executive board member Detlev von Platen in a company sales report. "We just celebrated the world premiere of the new 911 at the end of the year at the Los Angeles auto show, and yet our sports car icon once again inspired more customers in 2018 than in the previous year."
The 911 debut will help to counterbalance expected losses from the just-released Taycan, Porsche's first full-electric series production car.
Porsche is expected to make 20,000 to 30,000 of the six-figure Taycan sedan, representing a $6.6 billion investment from the brand, including a new factory near the company's headquarters in Stuttgart, Germany.
"Given the pomp and ceremony for recent EV launches, Porsche's introduction of the new 911 Carrera was relatively low key,” Dean said. The 911 is well-timed, he said because it will compensate for the transition to battery-electric vehicles, which starts with the new Taycan, its "least-profitable model.”
In an interview with Bloomberg TV, Porsche CEO Oliver Blume said the Taycan will eventually will generate a "good margin," especially in the top-end versions, although returns will not be as high as for other models.
Dean said the Taycan is likely to be profitable in 2023, by which time battery prices will have declined significantly.
In the meantime, Porsche's decision to push its higher-margin Taycan "Turbo" version first is a smart strategy. (In this case, the term "Turbo" is used as a branding label to refer to the more expensive Taycan variants, since an actual electric turbo is impossible.)
As for the 992, its percentage of brand earnings is expected to increase even more in 2020, as higher-margin derivatives are launched over the next 18 months, including, yes, a Turbo version with an actual turbocharger. Dean expects profit margins on the 911 Turbo to exceed 50 percent.
