Porsche sets CPO sales record

Porsche's U.S. dealers sold more certified pre-owned vehicles in June than they have in any month since they began marketing them 17 years ago.

The brand sold nearly 3,000 CPO vehicles last month, vs. 5,000 new vehicles, Porsche Cars North America CEO Klaus Zellmer told reporters last week.

CPO activity "is at absolute record levels," he said from his home via video conference. But what the surge means is not entirely clear.

Rising used-Porsche sales could suggest some softening in demand for new vehicles as the prospect of a prolonged economic recession looms. Even Porsche's well-paid clientele are not immune from getting pink-slipped as the coronavirus pandemic tightens its chokehold on the U.S. economy.

The uptick in CPO sales "signals a certain [price] sensitivity in the market," Zellmer said. "There's a certain part of the market that says, 'I want to have a Porsche, it's my dream ... but I want to be a little bit cautious because I don't know what's coming.' "

The pandemic also upended Porsche's most significant product launch since the brand diversified into SUVs. The U.S. was the launch market for the Taycan, Porsche's first battery-electric vehicle. The high-powered, high-priced Turbo and Turbo S versions arrived in December, followed by the lower-priced 4S variant in mid-April.

But just as U.S. market production of the EV was to ramp up at Porsche's Zuffenhausen factory in Germany, the plant went into a six-week shutdown after COVID-19 cases spread across Europe. That interruption means some U.S. reservation holders must wait longer for their Taycan.

"The supply that we will get this year for the United States is far less than the orders we have," Zellmer said. "We've delivered so far about 1,000 Taycans, and we have many more thousands in our order bank."

Zellmer put a positive spin on the delay: "It's good for residual values and for profitability because demand by far exceeds our supply possibilities at this point of time."

Like the rest of the industry, Porsche had a rough second quarter. Sales tumbled 20 percent, vs. a 31 percent decline for the overall luxury segment. In April, the brand's sales declined nearly 46 percent as more than half of its 192 U.S. showrooms were forced to shutter because of shelter-in place orders.

"The COVID-19 tragedy hit us hard," Zellmer said. "We've lost momentum, we've lost customers."

But now, the momentum and customers are returning. Porsche ended June down just 3.1 percent.

"We are almost back on the retail levels we were able to achieve in June 2019" — which was a record June, Zellmer said. "We are rebounding much faster than originally expected."

Pandemic or not, Porsche is broadening its U.S. retail footprint. Later this month, Porsche will open its 193rd dealership. The 72,000-square-foot store in Ontario, Calif., is owned by Walter's Automotive Group.

"It just shows that we don't stop, even though at the moment things have not gone as originally planned," Zellmer said.

The pandemic also has affected Porsche's subscription program. The program has 70 percent of the members it had before the crisis began, which has hampered profitability.

Launched in 2017 in Atlanta, the Porsche Drive subscription program starts at $2,100 a month and offers unlimited vehicle swaps.

The program is "strategically really important" for a premium brand looking to develop the next generation of customers, Zellmer said. Four out of five Porsche Drive customers are new to the brand, and subscription customers are eight years younger than the average Porsche customer.

"Younger generations are not so convinced to buy into a Porsche through ownership," Zellmer said. People want to have access to the brand without being locked into a three-year lease, he said.

"They want to get in and out just like they feel," Zellmer said.

Porsche has seen enough interest in the mobility model to expand the program to Las Vegas, Phoenix, San Diego and Toronto last year. More cities are planned this year.

Even so, selling customers on pricey monthly subscriptions for the flexibility to swap sports cars on demand is not an "easy walk in the park," Zellmer conceded.

"It's not that people are queuing up, saying. 'I want to pay $3,300 a month and have 23 models from Porsche to choose from,' " he said.