With new product coming, Porsche dealers aim high
Age: 58 Dealer since: 1976 Dealerships: 11 in Southern California under the LAcarGuy brand, including Pacific Porsche in Torrance, Calif. Average monthly Porsche sales in 2011: 33 new, 16 used Quote: "I think we need to be very cognizant of having entry-level cars. Boxster and Cayman need to continue to fight to be a great car at a certain price point."
Photo credit: MARK RECHTIN
With the dark days of the 2009 recession behind them, Porsche dealers head into 2012 with renewed vigor and showrooms soon to be stocked with new arrivals, including the next-generation 911.
Porsche's U.S. sales climbed to 29,023 in 2011, up 15 percent over 2010, as the brand regained some momentum lost during the economic downturn.
The luxury carmaker is setting its sights higher for 2012. It hopes to sell 34,000 vehicles in the United States this year, a target it's likely to reach with the launch of the redesigned 911 and Boxster, said Porsche dealer Mike Sullivan, a member of the Porsche Board of Regents.
But challenges remain: Inventory is tight, especially for hot-sellers such as the four-door Cayenne SUV, which is attracting a whole new crop of buyers to the brand.
Sullivan, who owns 11 dealerships in Southern California under the LAcarGuy brand, spoke with Staff Reporter Christina Rogers.
How was 2011 for Porsche dealers?
It was a good year. Our toughest year was during the recession of 2009. Everything we've been doing with Porsche lately has been very positive. We went from 25,000 to 29,000 cars. Next year, we'll go north of 34,000 cars. Volume is improving. The mix is very interesting. We sold more 911s last year than the year before, even though consumers knew we were going to replace it with the 991.
Why do you think that's so?
They did a real good job of mixing up the specialty cars. Instead of just running out the 911, which would have been a mistake, they made a number of specialty limited-edition cars. It piqued a lot of interest, even though it was the end of the existing 911. They did a great job of managing that cycle.
What will be the big issues for Porsche dealers in 2012?
The biggest challenge will be getting enough product. We expect to sell 34,000 cars, but we could have done 34,000 cars last year if we'd been able to get enough Cayenne. Cayenne was short all year. We sold 13,000 Cayennes, whereas we could have easily done 16,000 to 17,000.
The 34,000 in 2012 will be product limited, but for Porsche, that's not all bad. We want to be a little short. We never want to be a little long.
We'll have the new 911 starting next month, and it will ramp up through the year. And then halfway through that, we get the new Boxster, which is absolutely stunning. It will ramp up through the year. So we'll be short of product for most of the year.
Are dealers satisfied with Porsche?
The dealers are very pleased. There's almost never a Porsche dealership for sale. If there is, it commands an appropriate number. I'd love to buy another Porsche store.
Does Porsche need more U.S. dealers?
No. There should be one fewer dealer and one fewer car. That's the basic marketing axiom. It's imperative with a franchise like Porsche. At Toyota, it's a volume franchise. We make our living selling lots of Camrys and Priuses. But at Porsche, you've got to be a hair light. Resale value is so important.
People that buy these cars know they're going to hold their resale value. If the car is long and discounted, that's a bad thing. The consumer is very sharp and understands if he has to pay retail and wait 60 days to get it, there is his protection going in.
Are Porsche dealers profitable?
Do you expect profitability to improve in 2012?
Absolutely. My overhead isn't going to change in 2012. I've got my store, and it's a beautiful, new, 6-year-old store, so my overhead isn't going to change. There is nothing in my world that's going to hurt me, and I'm going to get another 15 percent more in product next year. I've got a new 911 and Boxster on the way, and next year, we have a new small SUV coming. We got new product rolling out, which always helps.
Porsche doesn't change very often, so when we get a new 911, a new Boxster and an all-new SUV, that's a pretty big deal for us.
Is Porsche's certified used-vehicle program helping?
Used-car sales are very good. We have to fight to get enough cars. We scour the market looking for used Porsches. The reason I only do half of my 36 cars a month in Porsches is because of inventory limitations.
We're always looking to buy used Porsches and that's all part of supporting the customer.
Is Porsche encouraging its dealers to take part in facility-improvement programs?
They're always looking for facility improvements. The operative word is "always." They have a lot of ideas. One day, they like shiny black tiles. The next day, they like flat black tiles.
It's OK. As long as we're making money, we can do that.
Do they have a certain program under way?
Absolutely. We all just finished our facility upgrades by the last quarter of 2011. We used to have these big, curved walls with life-sized photographs on them of cars. And seven years ago, they loved that. Now, they hate it. So we had to put them in and take them out.
Sometimes I've got to laugh; if that's the silliest thing they do, whatever.
What are Porsche dealers doing to boost service business?
We certainly do all the creature-comfort things to earn business. The biggest one is I have a bunch of Porsche loaner cars. If you're in for more than an hour, you can get a Porsche loaner. That's not totally common. Not all dealers do that, and certainly, a few years ago, it was uncommon. But I think it's one of the more interesting things we do is have a fleet of Porsche loaners.
Is it difficult to get Porsche buyers financed?
No. Porsche credit buys about 75 percent of my finance paper, and the other 25 percent we lay off to a couple different banks. Credit is not an issue anymore. There was a relatively short swing in 2009, maybe a little bit into 2010, but it went away quickly. Interest rates are low across the board for everything. Consumer loans are very inexpensive, right now. Money is plentiful for people who have decent credit.
Porsche is considering a small sedan. What are your thoughts on Porsche entering that segment?
I think people who scoffed at where we were going 10 years ago have either left the franchise or admitted that they didn't really understand. Last year, about 68 percent of new Porsches sold were four-doors. So five, six, eight years ago, people would have scoffed at what's now become a major part of our sales. The figure is still on the high side, mostly because we were running out the last-generation 911 and Boxster.
The coupe segment was drying up a little bit by design. We were at the end of a model cycle. The 68 percent should probably be more like 58 percent or 55 percent, but the point is, well over half of our cars are four-doors, so people are responding very well. The Cayenne is sold out. The Panamera has been very well-received.
I'm very comfortable that we're on the right track. The little sedan will absolutely, without question, be the right thing to do. The new little SUV -- I think it's going to be a natural. It will bring in a younger, not quite fully affluent buyer into the Porsche world. It will be a nice addition. We'll bring those people into the mold, and they can then go from model to model to model.
Is anything else missing in the Porsche lineup?
I think we need to be very cognizant of having entry-level cars. Boxster and Cayman need to continue to fight to be a great car at a certain price point.
You can always make it better by adding $10,000, but we can't do that. We have to make a great $55,000 car. And we have to remember that the goal is to have it be $55,000.
Engineers have a natural tendency to overengineer. They can always make it bigger, faster and more exciting. But we have to have an economical model that we can live within.
Porsche will have to fight with itself to stay in a segment and dominate it and allow people to come into the family and grow into 911s, Cayennes and Panameras.
I think that will be one of challenges and something we have to work on. We always want to make it more of a race car because it's cool, but we can't keep doing that.
What's your days supply, and is it where you want it to be?
It's even a little short for me. And I like it short. We're going and buying cars around the country. We've run out of 911s.
I've got probably six or eight cars on the ground to sell. Anytime you're at the end of a model cycle, like we are with the 911, Boxster and Cayman, we're running out, so the days supply is very short.
The Cayenne has been sold out for a couple years, and we're very short. I think today I have a few Panameras because several came in, but they have to last me to January, February, into March.
We're running a little less than a 30 day-supply, and I probably need a little closer to 45.
What can the factory do to help Porsche dealers sell more vehicles?
It's tough. They're massaging it pretty effectively. Really, my complaint is kind of a compliment. I want a few more cars, but they've got it pretty close. If all I'm doing is saying I'm a little light, that's pretty good.
Are you conquesting buyers? If so, from where and with what products?
Oh, sure. My used-car lot is 50 percent used Porsches and 50 percent trade-ins. I've got all sorts of cars. We don't just take in BMWs and Mercedes. We take in Lexus and, every now and then, a Suburban. My used-car lot has a very interesting mix of cars in it. It is not only Aston Martins. Certainly, Boxster brings some new people into the segment.
Panamera and Cayenne bring in new people who may have never seen themselves as Porsche owners before.
Now, an athletic, 40-year-old woman with 2.1 children who bikes and runs and does all these things with her kids can drive a Porsche. Some of these trade-ins are unusual for a Porsche lot.
Porsche wants to double global sales by 2018. Can it reach that goal?
I don't know if they're going to double it. I'm not hung up on doubling it. The more important part is that they want to double growth every 10 years. I think that's healthy.
Introducing a new product every now and then is going to help. The new compact SUV will generate about 10,000 in sales. That's good growth. And say you do the small, four-door sedan. That will be another 6,000 new Porsche buyers.
They can probably do more and more with the Panamera. It's a pretty flexible platform. There are also opportunities with existing models like Cayenne.
I wouldn't be surprised if we see some diesels popping up in the car segment. I think Porsche is going to get a more rounded and nicely expanded lineup.