Porsche brings in the "Fire Captain"

Alexander Pollich

Author | Chai Xuchen

Editor | Zhou Zhiyu

After experiencing the "backlash" from dealers two months ago, Porsche finally made concessions to the Chinese market.

On July 20, Porsche announced a major personnel change. The current China President and CEO, Michael Kirsch, will be transferred on September 1, and will be succeeded by Alexander Pollich, who will be fully responsible for the brand's business in mainland China, Hong Kong, and Macau.

The day before this decision to change leadership was made, Porsche's global Chairman and CEO, Oliver Blume, came to China and held an internal meeting at the Shanghai headquarters of Porsche China.

From providing warehouse support, agreeing to increase subsidies, to now changing senior executives in the Greater China region, Porsche has almost fully accepted the demands of its dealers, and has acted more decisively than expected. This is because the loss in the Chinese market has caused it pain.

The interim report shows that Porsche's global sales in the first half of the year fell by 7% year-on-year, reaching 156,000 units; among them, the China region lost one-third of its sales, dropping to 29,500 units, becoming the main reason for the global sales decline. This indirectly led to a more than 30% decline in the company's operating profit in the first quarter, with a sales profit margin of 14.2%.

Two years ago, Michael Kirsch, who had rich experience in operating the Chinese market, was appointed as the President of Porsche China. Porsche and Chinese dealers hoped to stabilize the situation and boost sales under his leadership.

At that time, the growth of the luxury car market in China had shown signs of slowing down, the price war in the first-tier luxury car market was intensifying, entry-level and mid-range models were gradually becoming mainstream, and high premium products were becoming weaker. Porsche China's business also faced pressure.

However, Michael Kirsch's appointment became the beginning of Porsche's retreat in China.

In 2022, China became the only market where Porsche globally declined, losing the title of "largest single market" in 2023, and accelerating performance decline in the first half of this year. During this period, in order to meet sales targets, Michael Kirsch chose to continue to pressure dealers to hold inventory, leading to intensified conflicts between the two parties.

A person close to Porsche revealed that in the past, when cars were in short supply, dealers competed for quotas because it meant profit. However, after a huge market change, it became a hot potato, failing to meet quotas would affect overall rebates, and dealers had to "dump" to clear inventory, causing the price system to collapse.

This German luxury car brand, once beloved by the domestic middle class and wealthy, has thus slowed down.

Pollich, who has experience in "firefighting," has taken on the heavy responsibility.

Looking at his past work experience, Pollich successfully turned around the sluggish situation in the German market six years ago, making it the fastest-growing market for Porsche in recent years. Before becoming a "high-ranking official," he also participated in building Porsche's global sales network and expanded into the Canadian and UK markets However, market participants believe that the challenges for this successor may be far greater than the opportunities, as the Chinese market has undergone earth-shaking changes.

In the past, Porsche was a direct beneficiary of China's economic takeoff. After surpassing the United States to become the world's largest single market in 2015, sales increased by nearly 40% from 2018 to 2021.

Analysts point out that among Porsche's car buyers, 2-3% see Porsche as a ticket to enter the upper class. However, as industries such as education and online retail, which rapidly generate income, decline, this part of the buyers is gradually lost. The remaining high-net-worth customer base is also making new choices under the trend of consumption downgrading and the rise of domestic luxury cars.

Porsche is not without effort, but the luxury car market in China is no longer the same. For Porsche headquarters and the successor, the most important thing is to quickly change their mindset and keep up with the pace.

On the positive side, Porsche China still has good cards in hand.

Facing the impact of Aito, Nio, and other new forces, as well as the shifting trend of luxury car consumption, Porsche plans to launch no less than four new or redesigned models in China this year, including the third-generation Panamera, the new all-electric Taycan, the second-generation Porsche Macan, and the mid-term facelifted 911, starting the strongest product offensive. This is the foundation for Porsche China to reverse its decline this year.

However, how to mobilize the power of dealers, repair the relationship between the two parties, and formulate reasonable policies in line with market trends, enhance channel capabilities, is also the urgent task that Pollich must solve next, and it is the key to Porsche China's turnaround.

It is worth mentioning that Porsche's dealer investors are generally strong luxury car dealer groups with rich frontline sales experience and a high-net-worth customer base, which is crucial for Porsche.

In the personnel changes announced by Porsche China this time, in addition to maintaining the current Porsche operations, Pollich's main tasks also include implementing a growth strategy tailored to the Chinese market, focusing on closer cooperation with local dealers, and further optimizing internal processes and structures.

It seems that Porsche has taken the right attitude to regain the Chinese market, and the group also expects him to provide new impetus for Porsche's future development after solving existing problems.

The direction is clear, but there are still a thousand threads waiting for this Porsche veteran to sort out one by one. How to eliminate the deep-rooted problems hidden in the glorious period under the rapid changes in the Chinese market is the key to the revival of Porsche China.

The burden of being the "firefighter" is heavy, but Porsche's opportunities are running out