A new Porsche can cost as much as $300,000. It does not appear to matter. Porsche dealers have very small inventories due to low supply and high demand. Some even charge well above the manufacturer’s suggested retail price. Porsche will go public soon. It will command a $75 billion market capitalization as its initial public offering goes to market. The figure is extraordinary, given that Porsche is nowhere near the largest car company in the world based on unit sales.
Porsche’s revenue stands at about $8 billion, and its profits are just below $1.5 billion. That profit margin is close to unprecedented.
Volkswagen, Porsche’s parent, already has lined up buyers for the shares from several sovereign wealth funds and institutional investors. This means the $75 billion is all but locked in.
The IPO shows the extent that the brand can be valued well above unit sales. Ford and General Motors have valuations in the $60 billion range. Porsche, truly a niche manufacturer, sells a fraction of their volume.
Porsche is another reminder of why Tesla’s market cap is near $1 trillion. Brand counts. So does a moat that keeps other car companies from competing. Porsche builds some of the fastest cars in the world. And the components and workmanship cannot be matched by other brands, with the exception of Rolls Royce and a few other ultra sports car manufacturers.
Porsche does share something with companies like GM and VW. It was founded in 1931 by a single inventor, Ferdinand Porsche. Most of the early models and the foundation of the current ones belong to him.
Porsche is an example of how much brands matter. Regardless of what happens to the car market worldwide, its sales will never approach those of such famous luxury car companies as BMW, Mercedes and Audi. Investors do not care.
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