Porsche manages a Chinese factory because it likes a cachet of ‘Made in Germany’

Porsche has refused to build a factory in China, its largest and most profitable market, despite struggling with enough German-made sports cars to meet a rise in Asian demand at end of last year.

“Quality and quality are still an argument to be made out of Europe for China,” chief executive Oliver Blume told the Financial Times. “Today it doesn’t make any sense [to move production]. ”

Blume’s position is quite different from other German brands, including Audi, BMW and Mercedes, which are increasingly manufacturing cars for the Chinese market locally, often through joint ventures.

Last year, Daimler Ola chief Kallenius told the FT that the Stuttgart-based company would not expand production further in Germany, where labor costs are high, and would invest money in China.

But Blume, who also sits on the board of Porsche’s parent company Volkswagen, said it was worth including higher costs for the cachet of the “Made in Germany” brand.

“That’s also the feedback we’ve received from our vendors and customers,” he said.

Porsche, which accounts for about 40 percent of VW Group’s annual profits, relies heavily on China.

“It was only 10 years ago when Porsche sold less than 100,000 units worldwide,” said Arndt Ellinghorst, an analyst at Bernstein. “They now sell nearly 90,000 units in China alone. ”

The country, which accounts for about a third of Porsche’s sales, was the only major market in which the company recorded growth during 2020 ravaged by pandemic.

But while sales of China-based Stuttgart-based carmakers grew 3 percent last year, Audi’s sister brand enjoyed a 5.4 percent increase, while BMW delivered 7.4 percent more cars and Mercedes 11.7 percent.

The prime price market was developing much faster [than expected in China] and we couldn’t follow it because 100 per cent of our output comes from Europe, ”Blume explained.

However, he said, as a result Porsche was able to maintain more stable prices, while competitors with production sites in China offered heavy discounts to encourage sales.

The former engineer also said Porsche, which owns six model ranges and sold a total of 272,000 cars last year, did not have enough sizes to test local production in China.

While Porsche is making one of its models in Slovakia, the company’s electrical ambitions are firmly rooted in Germany.

Its Porsche Taycan – designed to compete with Tesla’s Model 3 – is manufactured in the same factory as its 911 branded model at the company’s headquarters in Zuffenhausen, a northern region of Stuttgart.

Blume said this decision put aa strong signal ”to buyers that the car, which sold 20,000 units last year, was“ engineered and manufactured in Germany ”.

However, while acknowledging that the European base for Porsche was a “win-win situation” and a “strong signal for investment” in the region, he said market forces could change the organisation’s global footprint. in the future.

“In 10 years, I don’t know,” he said. “It depends a lot on how size develops and also the rules in each country. ”