Forget Pickups, Have You Seen the Margins Porsche Pulls for VW?
Pickup trucks and truck-based SUVs are the profit engines for domestic manufacturers, as they boast the widest and most comfortable margins in the industry — especially in the higher trims. That’s why companies like Ford (NYSE:F) and General Motors (NYSE:GM) love moving loaded pickups: Per unit, they return more profit than anything on the lower end (like a Fiesta or a Spark).
However, when it comes to boasting comfortable margins as a brand, one company does it better than virtually anyone else: Volkswagen AG (VLKAY.PK) property Porsche (POAHF.PK). For every one of Volkswagen’s lower-end, VW-badged vehicles, the company pockets about $850. For Lamborghini, another VW property, it’s a more respectable $5,200 per car; for the Ford F-150 pickup, it’s an impressive $8,000-$10,000 per unit sold.
For Porsche, $23,000 from each purchase — on average, across the brand’s range — is funneled into the company’s coffers. That’s a whole new car in profit alone, though admittedly not a Porsche.
This implies that Volkswagen has to sell about 28 Jettas or Passats or any other entry-level vehicle (carrying an $850 margin) to equal the profit returned by one Porsche vehicle, highlighting the importance of the portfolio of luxury brands to the company. Essentially, it all comes down to the customer that each product is aimed at.
“For one thing, [Porsche's] customers are far less price sensitive,” Bloomberg’s Kyle Stock wrote in a dissection of VW’s annual report last week. “Drivers wealthy enough to consider such a plush ride were likely making a mint on U.S. stocks last year, regardless of where they lived.”