Matty-Sways

Porsche is only a cog in VW, but it makes so much money that analysts say spinning it off is only way to get true value.

Porsche’s allure to car buyers is the sleek aerodynamic lines of its body and the growl of its internal-combustion engine. The financial story behind the car is even more impressive. It made 253,000 cars in 2018 as compared to 10.9 million vehicles at VW as a whole. Porsche will sell 20,000 Taycans (Porche's electric car) a year, compared with millions of id cars (VW's electric car).

In 2018 Porsche accounted for 10% of the VW’s revenues and a staggering 30% of profits. The same could be said for another division, Audi, but with a volume of 1.5 million cars. In an industry where low single digit operating margins are the norm, Porsche’s exceed 18%, with average profit per vehicle of €16,250 ($17,900) compared with €3,200 ($3,524.92) for Audi and €960 ($1,057.48) for the rest of the VW brand.

VW picked up Porsche for $8 billion ten years ago, after Porsche lost a bitter battle to take over the larger firm. Now some smaller VW shareholders think it is time to turn Porsche back into a stand-alone business. They point to the value unlocked by the spin-off of Ferrari from Fiat Chrysler in 2015. Using that success story as a benchmark, Porsche might be worth €150bn, according to Evercore isi, an equity-research firm.(VW’s entire market value is currently around half that.)

Frank Witter, VW’s CFO, called the notion a “legitimate question”. Not ever story is a success though, Aston Martin has plunged by 70% since the IPO last October. Porsche’s large returns rely in part on sharing the cost of developing new models across the wider group. Philippe Houchois of Jefferies says that such economies of scale are too important to jeopardise.

Another thing standing in the way of a Porsche spin-off is VW’s complicated governance structure were the state of Lower Saxony and VW’s powerful unions get a say. Taking all of this into consideration its unlikely Porsche’s extraordinary performance will be relinquished by VW any time soon.

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