BEIJING – Quality, rather than volume, will be the primary focus of Porsche in China this year as the German sports car brand seeks to maintain momentum in what is now its largest global market two consecutive years running.
That was the message from Franz Jung, president and CEO of Porsche China, and David Xiao, vice president of sales of Porsche China, at a media roundtable held in Beijing on February 15.
“Everything we do, everything we think of everyday, the customer is at the center of what we do,” said Jung. “It is very clear for us and particularly for me that only satisfied customers are helping us to achieve further growth and profitability.”
Last year, Porsche delivered 65,246 vehicles to customers in China (including Hong Kong and Macau), up 12 percent year-on-year, ranking eighth among leading premium brands. That volume accounted for more than a quarter of the brand’s global sales of 237,778 units, but the rate of growth was twice as fast. The Chinese market was primarily driven by the Macan and Cayenne SUVs, which accounted for more than 80 percent of total sales. The Macan alone accounted for more than half of total sales with a volume of over 34,000 units, up 22 percent. Sales were also boosted by the new 911, 718 Boxter and Cayman which were launched in the second half of the year and likely will receive a further boost this year from the new generation of Panamera already available for order.
“Growth is not possible without a strong market, strong marketing, and even more so strong products,” said Jung.
Jung stressed the importance of having a quality dealer network and satisfied dealers – which he says are also Porsche’s customers – as conducive to happy Chinese customers who “have much more power nowadays” unlike years past when supply couldn’t keep up with demand.
“The behavior from sales people was not always good enough. But this has been changed,” said Jung.
Asked what metrics Porsche uses to measure and improve quality, Jung said that Porsche has internal KPIs that measure service and sales quality of dealer operations similar to the Customer Service Index study conducted by J.D. Power. It basically asks a customer after the purchase how his/her experience with sales and aftersales was, how many times they needed to go back to the workshop, friendliness of the sales and aftersales people and their professionalism and product knowledge.
“We measure almost everything you can measure when it comes in front of the customer,” said Jung.
To aid in this effort and improve even further, Porsche not long ago opened its largest training center in the world in Shanghai, which provided 1,100 training courses to dealer employees in 2016, reaching 25,000 man days. “We do believe a constant training of our sales people, marketing people and even more so aftersales people is needed in order to have a higher customer satisfaction level,” said Jung.
By the end of last year, Porsche had 96 dealers in operation in 65 cities, including 12 new dealerships that opened last year under what Jung calls a very careful dealer development strategy built on quality rather than quantity. “The sustainability of the business is important. All this together has brought us to one of the finest dealer networks in China, not only from a hardware point of view but also from a software point of view,” said Jung.
This year, 12 more dealerships are expected to open primarily in second- and third-tier cities, according to Xiao, who was appointed last August as Porsche China’s first VP of sales from within China. “Our business development department has a software tool that provides complete analysis of what cities may have reached a threshold that requires a dealership opening,” said Xiao. “For example we just opened one in Wuhu, Anhui Province.”
Jung stressed that Porsche China is very careful with aggressive pricing and discounts and distribute volume into the country in order to stabilize them. Rather, it adjusts production according to market needs in order to make dealers profitable. “We do believe in a strong and profitable dealer network. Only then can we invest further into the future on both the product and dealer sides,” said Jung.
In fact the welfare of dealerships and OEM-dealer relationship is so important that Jung sometimes says to the dealers “51 percent of my heart belongs to you and 49 percent goes for the rest.”
“Personally, my day-to-day priority is relationship with our dealer organization,” said Jung. “We will not have too many dealers and not too many investors. That will only create problems rather than create profitable business.”
Last year was a good business year for the dealers, according to Xiao. “The OEM-dealer relationship is a serious matter to us and we constantly communicate with them about inventory, quota and sales performance. We try to help dealers minimize investment burden and make sure they have a more flexible scale.”
One key tactic that Porsche is trying to make it easier to attract Chinese customers new to the brand to dealerships is its own financial services offering, which has gotten stronger over the years. According to Xiao, seven years ago, 95 percent of the Porsche customers in China paid cash. Now Porsche Financial Services penetration rate has reached about 13 percent and combined with other banking options, the penetration is even higher. “We will try to increase this further in 2017,” said Xiao. Jung believes financial services are also a loyalty tool. “Most of our customers don’t need financial services because they have no money, they take it because it’s just more convenient,” said Jung.
Porsche will also be opening its Experience Center in Shanghai next to the Shanghai Circuit later this year to offer potential customers to experience what its cars and SUVs are able to do on the racetrack and is considering brand stores with different interpretation than what other brands have done.
One interesting customer profile Xiao shared was that the average age of Porsche customers in China is about 35, much younger than the global average, while the proportion of female owners was about 40 percent, twice as much as the global average. “They are getting younger and have more passion for life, and female buying power is very strong and they love SUVs,” said Xiao.
Asked whether he is happy that SUVs account for the majority of sales in China for a sports car brand, Jung said that there was no choice but to grow into the segment and Porsche reacted early enough to introduce relevant models. “Imagine if Porsche did not have an SUV in the Macan or Cayenne segment globally,” said Jung.
Having said that, Jung stressed that China is already the world’s fourth largest market for its two-door sports cars and Porsche wants to see better and more enthusiastic approach for these vehicles. The launch of the 718 Boxter and Cayman entry models, for example, was a very important step to bring younger people to the brand.
Asked about Porsche’s new energy vehicle plans in China, both Jung and Xiao stressed the importance of infrastructure. “I’m optimistic China will be ready to have enough infrastructure available that we can gradually sell more and more of those cars in China. Already in the Cayenne segment China is the biggest market for e-hybrid for Porsche,” said Jung. Xiao on the other hand pointed out that charging is the biggest challenge for EVs because many owners live in apartment complexes with their cars parked below ground. “China needs the government support and collaboration among brands to make it work,” said Xiao.
Currently Porsche offers e-hybrids for the 918 Spyder, Cayenne and Panamera in China, which account for 5 percent of total sales. The Cayenne e-hybrid accounts for 11 percent of the model sales in China.
On the sensitive issue of Chinese brands copying designs of Porsche vehicles such as the Macan, Jung said that Porsche will observe very carefully that there is no infringement. “If something looks similar, there is not much we can and want to do. But if something is against the law, we will have to carefully investigate how we react to it,” said Jung, who believes such practices will never be successful.
As for China’s market outlook, Jung believes China has the potential in 2017 to continue to grow but double-digit growth will be history as volumes get bigger. Porsche’s aim this year is to grow no slower than the market growth, which many expect to be around 5 percent.
“We want to grow in a consistent, sustainable way in the future, most importantly healthy growth rather than double-digit growth,” said Jung.