What’s the Volkswagen Group’s most profitable brand? Is it Bentley? Lamborghini?
Obviously it’s Porsche. I mean, how much could it possibly cost to make a water-cooled six-cylinder engine and a cheapo plastic interior? How much does an Outback 3.6R cost? Everything over that’s profit, for sure. But how much profit is there in every Porsche?
The odd thing about automakers being public corporations is that they are compelled to pretend that they are milling their products out of unobtanium in their public advertising while simultaneously bragging to their shareholders how they were able to make the crankshafts out of recycled lambskin condoms. No surprise that VW’s making hay of Porsche’s profitability in their annual report, and no surprise that the investor press has picked up on it. Bloomberg, therefore, read the report and came up with the amazing number of $23,000 profit per Porsche.
Bentley’s close to Porsche, with a per-car profit of about $21,000, but a cursory reading of this month’s Robb Report shows that Bentleys cost quite a bit more than Porsches. The cheapest Bentley costs more than all but the most expensive Porsches. So that profit margin is doubly amazing. Bloomberg further notes that
Indeed, Volkswagen’s high-end models carried the company last year, as demand waned for its more affordable cars and it poured research dollars into retooling its big sellers. The company R&D expenses climbed 23 percent last year, sucking up almost 6 percent of revenue. A euro that steadily gained on the dollar and a shaky Continental economy didn’t help results either. The company’s total sales for 2013 ticked up only 2.2 percent, to €197 billion ($275 billion at this morning’s exchange rate), while income slid 58 percent, to €9.1 billion.
There are two ways to look at this news. The Wannabe Warren Buffets who infest every car blog and continually tell people to drive a used ’89 Excel so they can put all their money into flipping houses or Bitcoins will deliver passionate, faux-jaded dissertations on how corporations have the almighty duty to earn as much money as possible and how the product is completely immaterial. The other crowd, we’ll call them Automobile Enthusiasts, will wonder if perhaps Porsche could sell the base 911 for $59,995, the way they did in 1995. True, back then the dollar was worth more, but the 1995 Porsche 911 was also milled from unobtanium.
In reality, the per-vehicle profit number includes the Cayman and the upcoming Macan, both of which probably cost about as much to build as a Santa Fe does, so I wouldn’t look for lower prices on Boxsters any time soon. But if you’re an investor, you must be very impressed with Volkswagen now…