When a cluster of Minneapolis luxury-car dealerships went up for sale last year, one brand was prized above the Mercedes-Benz and Audi stores.
“Porsche was the cherry on the cake,” Jay Hulbert, the president of the dealership group that acquired the outlets, said in a telephone interview. “The volume is so dramatically different, yet when you dig into the financial performance, Porsche meets your expectations and then some.”
For decades, Porsche AG took Henry Ford’s any-color-so-long-as-it’s-black approach. It offered only high-end, two-door sports cars. The addition of a second sport-utility vehicle to the lineup later this year, after a decade in which Porsche introduced its first SUV and four-door sedan, is heightening the interest of dealers who used to view the franchises mostly as trophy stores.
AutoNation Inc. (AN:US), Penske Automotive Group Inc. (PAG:US) and Asbury Automotive Group Inc. (ABG:US), three of the largest new-car retailers in the U.S., all have purchased Porsche franchises since 2010. In a period of sparse activity for auto-dealership acquisitions, the deals vaulted Porsche among the most frequently acquired franchises by publicly traded groups during that span.
The unit of Volkswagen AG (VOW), which took control of the Stuttgart, Germany-based automaker last August, has capped its U.S. dealer count as it expands its lineup, pushing its sales per franchise past higher-volume brands including Chrysler and Cadillac. Plus, Porsche models such as the 911 sports car command margins among the highest in the industry.
“If a dealer wanted to sell, I have 10 buyers willing to overpay” for a Porsche franchise, said Bob Morris, a director at auto-dealership brokerage Tim Lamb Group LLC.
While some Porsche aficionados chafe at the lineup’s expansion, seeing SUVs and four-door sedans as a violation of the brand’s principles, the value and profitability of the Porsche franchise has changed more dramatically than for any brand in the industry in the last 20 years, said Alan Haig, managing director for Presidio Automotive, which advises dealers who are looking to sell their stores.
“There aren’t that many sports-car buyers in the world,” said Haig, who previously oversaw acquisitions at AutoNation, the largest U.S. auto-dealer group. “Many Porsche stores were bought almost as a toy for the dealer, for him to have something nice to drive and to go on nice trips. But it wasn’t a serious money-making investment.”
That changed when the brand introduced the Cayenne SUV, which debuted in the U.S. market in 2003. Porsche transformed from drawing wealthy males to attracting well-off families who could justify paying $60,000 for an SUV that drove more like a sports car than a truck.
“They combined the strength of Porsche in terms of performance with what the market wanted, which was capacity to handle a family or grocery shopping or maybe pulling a boat,” Haig said in a telephone interview.
Next came the Panamera, the four-door sedan that Porsche began building in 2009. It attracted the 50- and 60-something buyer who wanted to be able to stow golf clubs or drive friends comfortably to dinner instead of squeezing into a coupe.
While Porsche offerings expanded, the number of Porsche dealerships in the U.S. has shrunk slightly to 189 today, from a little more than 200 in 2009, said Detlev von Platen, president and CEO of Porsche Cars North America Inc.
The simultaneous moves have done wonders for Porsche’s sales per franchise, a figure that’s crucial to dealers and is referred to within the industry as throughput.
Porsche’s throughput climbed to 183 vehicle sales per franchise last year, a 23 percent increase from a year earlier, according to Automotive News Data Center. Porsche franchises had better throughput than Chrysler Group LLC’s namesake brand or General Motors Co. (GM:US)’s Cadillac and they more than doubled those of GM’s Buick and Ford Motor Co. (F:US)’s Lincoln.
This year, Porsche is on pace to exceed 200 sales per franchise on surging demand for its Boxster and Cayman sports cars and the Cayenne. The brand’s U.S. deliveries increased 30 percent in the year’s first six months, paced by a 47 percent jump for Cayenne and tripling of Boxster and Cayman deliveries.
Even as the brand’s sales have risen thanks in part to entry-level Cayennes that start at less than $50,000, Porsche dealers still sell enough of the brand’s higher-end models to produce eye-popping margins within the auto-retail industry.
Presidio’s Haig estimates that a Porsche dealer may make about $10,000 per new vehicle. By comparison, a Ford dealer probably would make about $4,000 on a high-end pickup, and dealers for Toyota Motor Corp. (7203)’s Lexus luxury brand likely average $3,000 apiece.
“We haven’t seen a scintilla of compromise with respect to the brand promise and brand equity in the decisions that they’ve made,” said Greg Goodwin, chief executive officer of the West Coast dealer group Kuni Automotive, which bought a Porsche store in San Diego in 2011.
The lure of owning a Porsche dealership also extends into the service bay. The company’s models are some of the world’s most highly engineered vehicles, making it difficult for independent repair shops to compete with dealers.
Porsche owners also have a reputation for wanting to maintain their cars well.
“When the Porsche guy comes in, he’s going to get the highest-end tires,” Haig said. “He’s happy paying $150 for an oil change. He’s happy doing the multipoint inspections. He’s going to really maintain that car well. That’s his baby. So the shop is busy.”
Porsche is revealing the Macan small SUV at the Los Angeles auto show later this year that extends the brand into another segment. Once the Macan is on the market, SUVs may account for a little more than half of Porsche sales, Von Platen said.
On top of the new product, Porsche is building a new headquarters in Atlanta that will include a test track and delivery center. Dealers will be able to send customers there or to a Porsche Experience Center that’s also under construction in the Los Angeles area.
This will give owners a chance to push the limits of sports cars that can churn 560 horsepower and reach top speeds of almost 200 miles (322 kilometers) per hour.
“You can’t really benefit from any of that unless you’re severely violating the law,” Haig said. “They see this as a matter of there being no Autobahn in the U.S., so let’s just build our own.”
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