ATLANTA — This is a milestone year for Porsche: The German sports car maker famous for its wailing flat-six engine leapt into a silent future.
U.S. deliveries of the Taycan, Porsche's first battery-electric vehicle, ramped up early this year. Porsche reported about 350 Taycan sales through March in the U.S. Global demand for the Taycan has outstripped Porsche's expectations, forcing it to double annual capacity to 40,000.
"The Taycan, from a performance standpoint, is the sports car in the battery-electric vehicle segment right now," Porsche Cars North America CEO Klaus Zellmer told Automotive News. "That's what people aspire for."
Zellmer, 53, spoke with Staff Reporter Urvaksh Karkaria about Porsche's first Super Bowl commercial in more than two decades, early interest in the Taycan and the company's response to the coronavirus pandemic. Here are edited excerpts.
Q: How are you managing operations during this period of uncertainty?
A: When the crisis hit in March, the first and foremost question was how do we keep everybody safe? How do we help dealers keep their business going and get that business that's out there, while respecting social distancing?
This is my 10th week working from home — which is completely unprecedented for me. From one day to the other, we completely shifted everything toward remote and teleworking.
The spontaneous interaction is something I really miss. Walking through the building — from office to office, from desk to desk — and just quickly absorbing something that you don't get in a regular meeting, that's missing. But everything we need to get done, in terms of tasks and sharing of ideas, all that works really well.
What have you learned most from the pandemic experience?
The world has changed. I can't tell you what it's going to look like a year from now, but I know it's going to look different.
COVID-19 is driving everything toward digitalization. Prior to the pandemic, Porsche was piloting a digital program with 26 dealers to move the buying experience online — from shopping for a car to taking delivery with as little physical touch as possible. In June, we are going to have 70 dealers in that program because everyone realizes how important that is.
There will a bigger demand for vehicles across all segments. People do not want to be in public transport with the masses, they want to be in their individual car.
We also learned teleworking is very feasible. When we return to the office, we will see a higher share of meetings that will be conducted online.
What's your expectation for the rest of 2020 in the U.S.?
Based on our product lineup and the incredible reception of the Taycan, we had substantial growth potential for 2020. The COVID-19 crisis is a game changer. We already suffered in March and we had to accept a big hit in April.
It looks pretty good for late May. We are on budget for our original retail figure for May. I see the potential for us to getting back to our original monthly sales forecast. We will only lose what we lost in March and in April and hopefully then stay close to what we planned for the remainder of the year in terms of our monthly sales.
We furloughed contract workers and service providers at our Porsche Experience Centers to drop a little bit of weight in terms of cost. We have not laid off full-time employees. We want to keep it that way, but of course the big question is what's happening in the second half of the year in terms of retail sales and this economy. How big will the hit be for Porsche going forward?
What sort of consumer demand do you expect for the second half of the year?
What we are seeing now is the effect of COVID-19 on the auto industry. What we don't know is the actual effect on the economy. We'll find out in the second half of the year.
But industrywide, new-car sales in 2020 are expected to decline 15 to 30 percent from last year. In Q3 we are going to see some pent-up demand. The biggest effect of COVID-19 on the economy will be in Q4.
In 2021, we'll see whether this economy is able to digest the impact of COVID-19. Restaurants will have to cope with reduced efficiencies because of physical distancing measures that will be part of the new normal. We'll see if businesses will be able to survive with that new set of rules.
How do you stoke demand?
At the peak of the shutdown, dealer sales operations were down 50 percent. Now we are down 12 percent, so we're coming back.
In March, there was a massive drop in traffic on dealer websites and our national website. People were not engaging with Porsche. We shifted everything that we originally had in our marketing communications plan into the digital-activation front.
We're back to previous-year levels in terms of traffic. So we created buzz that inspired people to engage with Porsche. Now we have to onboard dealers because that's where the closing of deals will have to take place.
We initiated a plan in late March called Square One. We are challenging every assumption we've made for the remainder of the year, including sales and production forecasts. If we do not see demand for the product, we will first reduce volume. Porsche will always try to get the balance of supply and demand before we put thousands of dollars into the glove box.
What's the plan to get consumers comfortable with returning to Porsche's stores?
Porsche customers must feel not just welcome but safe in our dealerships, both for sales and service. Our dealers recognized this and moved quickly with us to establish a new normal in standards for disinfecting vehicles and maintaining social distance.
We do our own research with customers about sales and service, and we are seeing the levels of satisfaction climb. They were already good, but post-pandemic, we see a continual gain in how customers rate their experience with our dealers.
The growth of home services is also part of helping customers stay safe. Porsche very quickly provided financial support to dealers to help them expand home delivery of purchased or leased vehicles, as well as home pickup and drop-off for service appointments. This was all part of the "Porsche At Your Service" package we rolled out on April 2 to support our dealers as they confronted these challenges.
How has the pandemic affected Taycan deliveries in the U.S.?
We see demand outpacing our supply possibilities for the Taycan. We had to close the factory for six weeks in Germany. That six-week window was very much reserved for fulfilling the U.S. demand. We had to take thousands of cars out of our sales plan for the U.S. and Canada this year.
For the first time in more than 20 years, Porsche advertised in the Super Bowl this year. Why?
If we would have known COVID-19 was coming, we would have probably reconsidered that huge investment for a small brand like Porsche.
The inspiration really was us saying, "Hey, this is new era for Porsche." This is a milestone that is only comparable to us coming from two-door sports cars to sell an SUV in 2003. Milestones like that have to have a big impact on the brand. We wanted to convey that an electric car is not boring. If anything, it's inspiring, exhilarating, fast, beautiful and fun. We wanted to convey that facet of our brand to a big audience.
The digital audience before Super Bowl was huge. We had over 20 million people watching the video on YouTube. On actual game day, having an audience of 100 million people potentially watching your spot — there aren't many other opportunities in the United States for such a stage.
How do you see the pandemic accelerating the shift toward digital retail?
People still want a Porsche, even if they are staying at home. What those customers expect is seamless digital access to our brand.
Before the pandemic, we were working on a host of initiatives as pilot programs. Now we are speeding up their development and deployment.
We invested, last year, in a new office for our subsidiary Porsche Digital, in the same building as our North American corporate headquarters. Sharing space with those coders and developers means we can move faster to bring new platforms to market. This includes online vehicle sales.
We also just launched a new, searchable online platform for certified pre-owned and other used Porsche cars that are in stock at our dealerships nationwide. We call it Porsche Finder, and a Porsche Finder function for new vehicles will follow soon.
Porsche unveiled the prototype of its next-generation dealership design in California last year. How do you see the new design evolving?
Porsche Palm Springs was really well received by customers and has provided important lessons in how to approach dealership design for a more digital and community-focused era. Those lessons helped shape the design of two dealerships in Germany and China. This is a learning process more than an end goal, so I would expect us to incorporate new lessons from the pandemic as we think about future projects.
What has Porsche learned from the expansion of its subscription service, the Passport program?
Expanding to Las Vegas, Phoenix, San Diego and Toronto last summer has confirmed what we learned from the first pilot in Atlanta: There is a market for shorter-term access to our brand. We've also learned how to roll out operations to our dealers and bring scale to the pilot.
We have rebranded current and future mobility services under one name: Porsche Drive. What had been the monthly program, Passport, will now be Porsche Drive-Subscription, and the short-term rental program will be Porsche Drive-Rental.
Two fundamental learnings from the Atlanta pilot remain true for our new markets: Around 80 percent of Porsche Drive-Subscription members have never previously owned a Porsche, and members are eight years younger than the average Porsche buyer.
We've also had several members who have been in the program for over two years, while others take advantage of the month-to-month membership and remain in the program for a shorter duration but decide to purchase or lease a Porsche vehicle. For us, this tells us the flexibility and convenience of the program is appealing to a new audience.
During the pandemic we temporarily suspended concierge deliveries at a reduced membership fee, but vehicle exchanges can be done at the dealership with no contact. We are accepting new members and plan to expand to new markets later this year, if there aren't any unforeseen developments with the economy.
