No one is on top forever. Even the Yankees lose. In fact, the Yankees lose quite often these days (and if there is any justice in this universe, the Dodgers will join them soon). Being a baseball fan is a great way to learn about humility. Another way is to be a car company executive.
When we first started publishing The Morning Dump, Porsche was still in a fairly enviable position. These days? There’s a little less to envy. The company has a plan, though, to get back to the good old days. The same could probably be said of CarMax, which has struggled to keep up with Carvana in the transition to online used car sales.
Uber has long wanted to transition to robotaxis, and is making deals wherever it can. In Las Vegas, this means making a deal with Zoox. That seems like a safer bet than the ones most people are used to making in Vegas. Credit availability has improved dramatically, as lenders seem to be willing to wager a little more on subprime buyers. Is that a safe bet?
How Many Derivatives Could There Be Above Porsche’s Current Lineup?
Porsche was really on top of the world a few years ago. It made a lot of cars in a few key segments. With the exception of the Taycan, most of those cars seemed to be of the high-margin variety. Or, at least, the high-margin SUVs the company was selling in places like China were enough to cover up any sins from the sports cars.
And then the world changed. I need a shorthand to quickly summarize the trio of impacts that have struck German car companies since the pandemic: Tariffs, BEV adoption slowing, and the loss of China. Der Horror? Maybe that’s too extreme.
Either way, Porsche has been dealing with that, and its Fiscal Year 2025 report starts with the bad news, which is that sales were down, revenue was down, and, thanks to BEV-related costs, profits were basically nil. Is it getting better this year? Barely. The brand needs a bigger vision, and the new CEO, Michael Leiters, has one:
“Since I took office, our management team has systematically analysed the situation and begun a series of initial targeted measures. These include the consistent application of our Value over Volume principle, especially in the difficult market environment of China; and the quality-oriented ramp-up of production of the all-electric Cayenne. We will streamline our management structure, reduce hierarchies and cut back on bureaucracy. We have also already begun to focus more strongly on our core business.” At the company’s annual press conference in Stuttgart, Michael Leiters emphasised: “We are using the current challenges as an opportunity to act even more decisively. We will comprehensively reposition Porsche, make the company leaner, faster and the products even more desirable.”
Leiters clearly expressed his own expectations of the company: “The name Dr. Ing. h.c. F. Porsche stands for the technical excellence of a sports car manufacturer. We stand for uncompromisingly good sports cars that you want to drive yourself, that are fun, that convey performance and passion. And all this regardless of the type of powertrain.” Seventy days after taking office in January, Leiters outlined the first concrete cornerstones of his Strategy 2035: “We are considering the expansion of our product portfolio in order to grow in higher-margin segments. In doing so, we are looking at models and derivatives both above our current two-door sports cars and above the Cayenne.” With a view to the capital market, he added: “With Strategy 2035, we want to lay the foundations for sustainably strong cash flow, strong results and margins that are appropriate for Porsche.”
That bolded bit is what I’m interested in right now. In the image at the top of this post, there’s probably the Porsche three-row SUV everyone expects. Think of it as a GLS/X7- fighter. It doesn’t sound like the brand wants to go below what it’s currently doing, so don’t expect a Miata-fighting sports car, sub-Taycan sedan, or a tiny hatchback city car.
What’s a higher-margin segment? Sure, there’s your large seven-seater SUV. What could go above the 911? Well, as Leiters said, there seems to be no end to the number of ways you can make a 911 more exciting and more expensive (Dakar, GT3 RS, R, et cetera). Porsche is great at making cars expensive. Not since the 918 has Porsche offered a true hypercar, and I’m not sure the Mission X is going to be it. Every Porsche CEO wants to make their own 959/Carrera GT, and Porsche as a brand can probably find someone to buy it.
Huge volumes don’t seem to be on the minds of Porsche execs right now. Instead, Porsche seems to be moving more in the direction of a Ferrari.
Activist Investors Eye CarMax Expansion
I feel like I talk about Carvana all the time, whereas OG national used car retailer, CarMax, barely gets any airtime. The fact that we’re not talking about CarMax all the time goes to show that the brand’s pivot into digital sales hasn’t gone well. That’s why the company has a new CEO (Keith Barr) and, it seems, some new investors. Specifically, activist firm Satboard Value LP has purchased roughly $350 million in company shares.
The activist investor has nominated its own CEO, Jeff Smith, to the CarMax board, along with Bill Cobb, the chairman and CEO of Frontdoor Inc., according to a statement Wednesday confirming an earlier Bloomberg News report.
Starboard supports Barr, who starts this month, and is optimistic the former InterContinental Hotels Group CEO can be a catalyst for change at CarMax, Smith wrote in a letter to Barr.
“The company’s recent performance has fallen well short of underlying potential,” Smith wrote. “We believe these problems are fixable. As such, we are excited about the announcement of your appointment as CEO.”
No pressure! Since Carvana has a vending machine, maybe CarMax can get a claw machine.
Uber Goes Zoox
I am obligated to remind everyone that our own Jason Torchinsky once called BS on Zoox as a company, only to have them turn around and name their robotaxis after his euphemism for the vehicles. Full credit to Zoox, they actually deployed robotaxis, and are currently in Las Vegas and San Francisco.
One of the challenges of being a new rideshare-type startup is that everyone has Uber and Lyft on their phone and not, say, the Zoox app. That’s why the news from Zoox that it’s partnering with Uber is such a big deal:
We’re excited to announce that Zoox is partnering with Uber to bring our robotaxi experience to Uber’s growing autonomy platform in select cities. As part of a multi-year agreement, a dedicated fleet of Zoox robotaxis will be available through the Uber app, beginning later this year in Las Vegas and next year in Los Angeles. We will continue to offer our service through the Zoox app, in addition to rides being available through Uber in those cities.
Because the Zoox folks have a good sense of humor, it’s the robotaxi firm I’m most excited to see do well.
Credit Availability Is Up (Thanks To More Subprime Loans)
I’ve been talking about this a lot lately, so apologies, but things aren’t going to go poorly unless they go really poorly. Carmakers are still making cars, and cars are still getting more expensive, meaning that something has to give. There are plenty of hyperwealthy people. Not all of those hyperwealthy people are going to buy six Honda CR-Vs. They’re going to buy one car that costs as much as six Honda CR-Vs.
This means that carmakers have to find a way to make it possible for more consumers to buy cars, and that’s where financing comes in. The term “subprime” has a negative connotation, even though there are plenty of reasons why consumers might find themselves with less-than-perfect credit ratings. I know a business owner who moved to this country and had trouble getting a car because he simply had no credit, even though he had plenty of money and very little debt.
According to Cox Automotive, credit availability has improved a lot, thanks in large part to subprime buyers. This could be fine, so long as everything stays fine:
Credit access continued to broaden in February, with improvement across all channels and lender types offering financing opportunities in both new and used markets. However, the underlying picture carries increasing caution. Record negative equity, a sharply rising subprime share, widening yield spreads, and loan terms at their highest level on record all point to elevated borrowing costs and greater long-term financial risk. Consumers should carefully consider the full terms of any financing offer, particularly total loan length and overall cost.
It’s worth keeping an eye on, at least.
What I’m Listening To While Writing TMD
You’re easily led, but you’re much too scared to follow
Tell’em Elvis Costello! It’s “You belong to me.”
The Big Question
What are the next two vehicles Porsche should build?
Top photo: Porsche
1 – Luxury Van that is above the level of the Lexus LM designed to be operated by an employed driver on a new platform not used by Audi/VW/SKODA for a minimum of 5 years that is capable to tow a Race Car Trailer.
2 – A stripped down ‘Track Day’ Ready street legal entry level car that has an MSRP of $59,999*
* If purchased as part of the ‘Luxo-Track Package’ of Van + Car + Trailer.
I don’t think that even more upmarket/expensive Porches are likely to turn the company’s fortunes around: how many hypercars can they actually sell, what with the very limited pool of buyers and all the competition in that segment from names old and new?
Personally, I’d like to see some cheaper Porsches starting below $60K without so many frills and only having necessary tech. I’m not sure offering these would improve business overall for Porsche, but it’d be nice to have some actual sportscars for driving that weren’t super-heavy tech showcases requiring high velocities to elicit a thrill in the driver.
The price increase in all cars over the past half-decade is depressing, though perhaps I’m just prone to that reaction.
I spent a lot of time in the early 80’s being mistaken for Elvis Costello, which I can sort of see. My husband was constantly mistaken for Spike Lee, despite a big difference in height. This was all in NYC.
Two excellent movies to watch about real estate subprime credit collapse: 1. The Big Short, and 2. Margin Call. Big Short is more or less factual account of the events leading to the 2008 collapse, while Margin Call is a fictional 24 hours of a Wall Street type firm that realizes it is all about to come down and they will be bankrupted when it does.
It’s going to be a 3-row suv and hopefully an 8 or 12 cylinder front-engined Super GT car. I don’t think they liked all of the hype around the V12 showdown between Ferrari, Aston Martin and Lamborghini and being left out of the conversation.
I keep thinking Porsche already builds the cars they need to build, except they are too damn expensive, and the cars themselves are just too damn much.
A Cayman equivalent at $45k-$50k, with 225-250hp, lighter by about 250lbs, and just simpler all around would be a good start.
Or perhaps a modernized 944 for similar price ($40k-$50k), horsepower (200-250hp), and weight (<3000lbs) with usable rear seats, and not much tech. I'll even take cloth seats and hand-cranked windows, too.
The odds of seeing something like this are just as bad as me ever owning any of Porsche's current offerings. I'm sure they don't care, either.
I understand Porsche’s motivation to keep pushing upmarket, both in terms of mainstream products like a big SUV and niche offerings like Sonderwunsch commissions. If your product is already on par with or better than more expensive competitors, charging a lot more for a scant few glitzy specials seems like an easy recipe for improved margins.
The problem is that Porsche’s so much bigger than those competitors. A struggling carmaker like Aston Martin can safely bet that “there’s always money in the banana stand” of limited editions and bespoke one-offs, but the economics of a major car company staying major seem a lot different than those of a struggling one doing enough to keep its investors from pulling the plug.
Porsche made its name by offering experience and brand integrity rather than just luxurious exclusivity. The Cayenne didn’t succeed because the market needed another expensive SUV, but rather because people who liked what the brand stood for had another way to buy one when they were shopping that segment. And because the cars that established that reputation were still there to back it up.
I hope they’re looking at this upscale push as a first step rather than a broader vision, because it doesn’t seem like too much of a stretch for them to pare down to the core of what makes them good and broaden their fan base by offering some cheap seats, sort of like the bar menu at a restaurant where it’s hard to get a table.
I want those cheap seats to slot in at the bottom of their lineup in the form of a stubby little mid-engined runt with wheels pushed out to the corners. In profile it would look more like a McMurtry Speirling than a scaled-down Cayman, with power from a V6 or turbo 4. Maybe transverse mounted? Definitely offered with a manual gearbox. They don’t even have to spend money on new branding. Just call the convertible the 550; the coupe can be a 904.
The other car can fill the “crazy billionaire toy” space by offering the Tuthill/Meyers Manx LFG under license.
The next two Porsches? Stickshift, ICE, Boxster and Cayman replacements that mere well-heeled mortals can afford. And actually desire. Not holding my breath.
Make a Porsche version of the Miata. Back to basics roaster and coupe based design on 40+ years in the past. They aren’t getting China back. They aren’t going to beat the Chinese brands on luxury or performance. All they will do will hobble their global offerings trying to make something China specific. So many European brands seem to be focused on China. They lost its over retreat. They can try an bev Porsche but the best bev Porsche is probably an air cooled 911 that has been retrofit with a bev drive train. So build that. Plus the ice version.
When you said CarMax should get claw machines, the sight of a claw machine dropping cars into crushers sprang to mind. I’m not sure that’s the right path for them to take.
“The name Dr. Ing. h.c. F. Porsche stands for the technical excellence of a sports car manufacturer. We stand for uncompromisingly good sports cars that you want to drive yourself…” So the obvious next step is something bigger than a Cayenne… Brilliant.
What do *I* think they should build? More of the little toiletry pouches Lufthansa hands out! It’s perfectly sized and the pricing was spot on.
Rear-engine pickup truck. Sure, nobody else does it, for some reason, but you guys are built different.
Shit! You’re a genius! With lifted trucks these days, there is plenty of room to fit an engine back there! And who is putting heat-sensitive stuff in their pickup, anyway?
Just call it the Drakkar1 and you’re all set!
With the bed on the front!
If a front trunk is a frunk, is a front bed a Fred?
besides the obvious bed space issue, it would do a lot for 2wd in the snow
Porsche is doing the new b school thing. Robotically copy the successful. Worked out well for everyone who copied Tesla,. They’re going for a Ferrari vibe. They’ll do fine until the shallow pond gets fished out.
At least Zooxs didn’t choose Boring.
Goeasy has some input on that subprime thing.
Man out of Time is one of my favorites. Im also partial to Less than Zero, I Want You, Watching the Detectives, Radio Radio, there are so many choices.
I’d like to see a 914 or 912 entry level but that’s as likely as a brown longroof with a stick.
Sooooo many choices. Pump it Up. Accidents Will Happen, Veronica, Peace, Love and Understanding. The list goes on.
His wife, Diana Krall, is no slouch either.
Yes they both are greats. I saw him on his first NA tour and again at the ottawa blues fest. I saw her in ottawa at the NAC.
So Porsche is going to share more platforms with VW and have more expensive cars. So time to build its own version of the VW Atlas and start it at 200k!
“We’ve decided to go further upmarket” is a strange choice for most struggling brands, but that appears to be the strategy for damn near every company these days.
I won’t feel particularly bad when half of these brands fail.