Porsche’s effort to broaden its customer base could backfire: Exclusivity is a key brand attribute

Barely two months after taking the helm, he made a decent fist on Wednesday of outlining what ails the German sportscar manufacturer and providing the first hints of how he plans to put things right. He’s committed to restoring the company’s “former glory” and insists Porsche “represents a compelling recovery story.”

But investors hoping his arrival marks an immediate start of better times for the storied brand could be disappointed. Not only will reviving Porsche take a long time, it could also cost more than shareholders were hoping.

As a former CEO of McLaren, and chief technology officer at Ferrari, Leiters was a fine choice to succeed Oliver Blume, who will now focus exclusively on running Volkswagen rather than trying unsuccessfully to manage both companies.

But Leiters has a lot on his plate. Porsche unarguably is an iconic brand with a first-class heritage, but its recent strategy seems like a tale of misjudgement and hubris. Its approach of “modern luxury with scale benefits” turned out to be far inferior to Ferrari’s more exclusive model of selling comparatively few cars at higher prices.

The claim on the corporate website to be operating in a “structural growth environment” feels like wishful thinking. Porsche’s vehicle sales fell 10% last year, though that’s due partly to gaps in its model lineup. It won’t exceed the €40 billion ($46 billion) of revenue generated in 2024 until new products like the petrol version of its Macan SUV arrive in 2028, according to estimates compiled by Bloomberg. A 1% operating margin in 2025 is derisory and the roughly 6.5% return on sales promised for this year is hardly thrilling.

Meanwhile, the carmaker’s laudable electrification efforts got ahead of what its customers wanted, as well as the US’s shifting fuel economy and emission regulations. The Chinese market, which for years provided Porsche with buckets of cash, has delivered a lesson in humility. Porsche’s electric vehicle offerings are too expensive for ultra-competitive China and efforts to downsize the dealer network there continue.

Leiters concedes that reviving Porsche will “take time” and that the cost structure has become “bloated.”

Fortunately, it can still rely on wealthy US customers. But the 15% tariff on imported vehicles imposed by the White House, plus the stronger euro, have upset its profit calculations.

The company might have to consider what was unthinkable for a proudly German brand: building an American factory. There’s no decision on that yet and Leiters gave the impression that it is not likely to happen quickly and would be a “huge investment.”

After booking more than €3 billion of extraordinary charges last year, in part for retooling its electric vehicle strategy, management is forecasting another high three-digit million euros of exceptional costs this year. Unfortunately, Porsche can’t say the financial burdens needed to reposition itself will end there.

I’ve argued before that a much smaller Porsche could be a more valuable one. But Jefferies analyst Philippe Houchois reckons it “may have gone too far down the road of brand extension and dilution to reverse course.”

Leiters says that he will prioritize high sticker prices over selling more cars. His strategy, however, combines both ‘luxury’ and ‘premium’—or “exclusivity combined with approachability.”

I worry that chasing this broader customer base could put Porsche’s still elevated market valuation at risk.

The shares trade at 17 times this year’s estimated earnings. That’s well below Ferrari’s opulent 30 times or so, but much higher than premium automakers BMW and Mercedes-Benz, which are on 8 and 9 times respectively.

Porsche needs to show it has more in common with the Italian prancing horse than its German peers. While Porsche’s average selling prices remain far superior to Mercedes and BMW, it can do more to elevate the brand. Encouragingly, it’s considering new models or derivatives positioned above the two-door cash cow, the Porsche 911.

Leiters declined to say whether this means he will back a hypercar like the company’s electric Mission X concept or the beloved hybrid 918 Spyder that was launched more than a decade ago. Doing so would signal he hasn’t given up on chasing Ferrari.

But like the rest of Porsche’s revival, it will not be cheap. ©Bloomberg

The author is a Bloomberg Opinion columnist covering industrial companies in Europe.