Latest! Porsche responds

The dealer’s "forcing the palace" incident continued to ferment, and Porsche finally "couldn’t sit still".

On May 27, Porsche China issued an official statement, although it did not explicitly state the conflict with the dealer, it obliquely revealed its discussions with the dealer in many areas, including business policy, electrification transformation, and so on.

The discussion is multifaceted.

This newspaper previously reported on Porsche dealers’ "forcing the palace" (for details, see: Porsche’s "unable to sell" intensifies contradictions, dealers collectively "forcing the palace"?).

The cause of the incident was that, in the context of the increasingly volatile car market, Porsche China chose to press the dealer’s warehouse in order to complete the sales task. However, the pressure on the warehouse posed a huge financial pressure on some dealers, causing the contradiction between Porsche and some dealers to intensify. Some dealers stopped picking up cars and asked Porsche headquarters to provide subsidies while replacing relevant executives.

On May 27, Porsche China released the joint statement of Porsche China and all authorized dealers, "To clear the clouds, to see the right, and to move forward."

In its statement, Porsche China did not explicitly mention the "palace" incident, but said vaguely: "Porsche China and dealers are jointly facing a number of complex issues, with both opportunities and challenges. We understand and thank you for the concerns expressed recently about our partnership and future development."

Porsche China said that during the period of industry change and transformation, automakers must always actively listen to the voices of dealers from the front line. Only by cooperating more closely and supporting each other can manufacturers and dealers better meet the needs of Chinese consumers according to local conditions.

According to previous industry revelations, Porsche headquarters had dispatched a survey team to China to investigate the problems existing in the Chinese market. In this statement, Porsche China also mentioned that it has fully discussed with dealers to find effective ways to actively respond to market changes.

"These discussions cover a number of key areas, including but not limited to commercial policy, local customer insights, Client Server and the electrification transition," Porsche China said.

Small and medium-sized dealers’ demands are difficult to meet

In fact, the reporter further learned from informed sources that the contradiction between the luxury car brand and the dealer is mainly due to the disagreement between the three dealers of Xinfengtai, Badley and Meidong Group over the sales task, which has not been properly resolved so far.

Porsche’s sales in China have slumped so sharply this year that it has had to introduce unprecedented discounts to the market.

According to the reporter, for the lowest price Porsche Macan models (entry price 578,000 yuan), many Porsche centers in Shenzhen have released huge discounts. Among them, the discount rate of many Porsche centers is as high as 170,000 yuan, which also makes the low entry price of the model has dropped to about 400,000 yuan, directly competing with some new power brand models including NIO and Ideal.

Porsche’s second pure electric car series, the new pure electric Macan, has been officially launched at the 2024 Beijing Auto Show, with a suggested retail price of 728,000 yuan. In less than a month, the end point has seen a discount of more than 80,000 yuan. According to a Porsche Center in Shenzhen, its first new energy model Taycan is currently discounted by up to 200,000 yuan (the recommended retail price for the entry model is 1.008 million yuan).

The significant release of discounts means that dealers’ profits have plummeted, or even suffered losses.

It is reported that the precondition for the above-mentioned dealer investors to sign the agreement is that Porsche China will compensate for the loss of sales of new cars. Among them, Meidong Group requires a subsidy of 1 point of gross profit for new cars; Budley Group and other dealers rely on the Automobile Dealers Association to send a letter, asking for a subsidy of 4 points of gross profit.

However, according to the above-mentioned sources, Porsche places more emphasis on large dealer groups such as Baoaijie and Jebsen, and the above three dealers are not Porsche’s core dealers in China, and their demands have not received a timely response from Porsche China.

It is reported that Meidong Group has 16 Porsche dealership stores across the country, mostly concentrated in second-tier and lower-tier cities; Xinfengtai and Battery are both about 5, and they are also not deeply involved in first-tier cities.

By contrast, Baoaijie, a wholly owned subsidiary of Porsche Holding Salzburg, part of Germany’s Volkswagen Group, has 18 Porsche stores in China, mostly in first-tier cities. Jebsen introduced Porsche to China in 2001 and now has 21 Porsche sales and after-sales services outlets in eight first-tier cities.

Earlier, a dealer who did not want to be named also confirmed to reporters that "some newly established and small dealerships may experience greater operating pressure, while larger dealerships are slightly better off."

Go big on electrification

In fact, Porsche joining the army of price cuts will not only affect dealer profits, but also affect the value of used cars. As a "luxury" in the automobile consumer market, the decline in Porsche’s value will increase the wait-and-see mood of consumers holding currency.

According to a report released by the China Automobile Dealers Association, Por*********till the most valuable luxury car brand, but its value preservation rate has dropped from 83.1% in one year to 76.7% year-on-year. According to the 2024 consumer insights report released by McKinsey, about half of consumers are no longer willing to pay a premium for foreign brands.

It is worth noting that under the dual pressure of sales pressure and profit decline, Porsche dealers have chosen to withdraw from the network. In March this year, Porsche China’s 100th sales outlet, Guangzhou Tianhuan Plaza, which belongs to Jebsen Group, closed its stores.

And Porsche is also trying to turn things around with a big push, especially a big electrification transition. This year is also the year when Porsche launched the most new products.

According to the plan, Porsche plans to introduce no less than four new or significantly revamped models to the market in 2024, including the Panamera, Macan, Taycan, and 911 models.

Among them, the pure electric Macan and the new Taycan have been officially launched in the Chinese market. At the same time, Porsche will strive to sell 80% of new cars as pure electric models in 2030, and plans to invest 20 billion euros in digitalization in the next five years.