Porsche's Optimism Runs High

By VANESSA FUHRMANS

DETROIT—Nothing marked the long-awaited revival of glitz and giddy optimism at this city's annual auto show Monday more than Porsche, which, after a three-year absence, returned to the event with one of its most exotic sports cars yet, a gleaming 918 racing coupe.

Porsche returns to the Detroit auto show this year with the stylish, hybrid 918 racing coupe, a concept car boasting more than 760 horsepower. Detlev von Platen, president of North American operations, talks with WSJ's Jonathan Welsh about the company's hybrid pipeline and its outlook for the U.S. market.

The much buzzed-about return reinforces the high hopes that Porsche Automobil HoldingSE, as well as other luxury-car makers, have for this year's U.S. auto market, where Porsche's sales rose 29% in 2010. Speaking at the Detroit auto show, Porsche's chief executive, Matthias Mueller, said he expects Porsche's global sales to climb again in 2011 after rising roughly 25% to 95,000 last year.

But the high-performance concept car's premiere belies what is driving much of the German sports-car maker's sales and profit growth these days: its nonsports cars, the Panamera luxury sedan it launched in 2009 and its Cayenne sport-utility vehicle. And Porsche plans to shift further into nontraditional sports cars soon with a smaller version of the Cayenne that is tentatively dubbed the Cajun.

In the first three months of the fiscal year that began in August, global sales of the Panamera and Cayenne surged 94% and 151% respectively, outpacing more modest gains in Porsche's 911 and Boxster sports-car lineups. Together, the Panamera and Cayenne comprised 75% of total Porsche sales.

Those, and other new models that Porsche is considering, will play a large role in CEO Mueller's aim to dramatically boost Porsche's sales. On Monday, he said he expects Porsche's global sales to eventually more than double to 200,000 cars a year, significantly more the 150,000 cars Porsche executives previously said was possible. In addition to the Cajun SUV, he said Porsche was considering an entry-level sports car—akin to its 1950s classic, the 550—priced below the company's two-seated Boxster, which sells for a U.S. base price of $47,600.

"I can imagine having such a car in a few years," he said. He added that Porsche's management plans to come up with a new comprehensive product strategy within three months that could include additional plans.

Two big factors underpin Porsche's shift to nontraditional models. One is booming business in China, where new luxury consumers have overwhelmingly preferred bigger premium cars loaded with options to the zippy roadsters that have traditionally fueled Porsche sales in the U.S. and Europe. Porsche already sells more Cayennes in China than anywhere else and expects the country to be one of its biggest markets for the Panamera.

Though the U.S. would remain Porsche's largest market in 2011, Mr. Mueller said, China could overtake it "two or three years later."

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Associated Press

Porsche unveiled the 918 racing-coupe concept car in Detroit Monday. The company's U.S. sales rose about 29% last year.

The other big reason has to do with the broader aims of Porsche's parent-in-waiting,Volkswagen AG. The formal completion of the takeover isn't expected to happen until late 2011 at the earliest. But functionally, Porsche is already operating as the tenth auto brand in VW's auto empire, which also includes Audi, Skoda, Bentley and Lamborghini. Mr. Mueller, VW's product-strategy chief before taking the helm at Porsche in October, is a longtime confidante of VW Chief ExecutiveMartin Winterkorn, and VW has charged Porsche with leading development of the larger VW group's sports cars and some large luxury sedans.

"Porsche's core business will always be sports cars," Mr. Mueller said.

The company's move onto less-exclusive terrain has been well under way for several years, and was originally championed by former Porsche CEO Wendelin Wiedeking, who was ousted in the takeover battle.

But some in the industry question whether VW might take the strategy too far.

"In principle, it's the right approach. All of the premium-car makers have found new sales by expanding downmarket," says Ferdinand Dudenhöffer, director of the Center for Automotive Research at the University of Duisburg-Essen in Germany. "But I would be careful going smaller than the Boxster. That could just end up diluting the brand."

Nor does the lower rung of high-end sports cars seem to be where Porsche buyers are gravitating, says Max Warburton, auto analyst at Sanford C. Bernstein in London. He points out that Porsche's least-expensive models, the Boxster and its coupe variant, the Cayman, have been the most sluggish.

"It's the first time I've seen a car maker being squeezed upmarket, rather than down," Mr. Warburton said. "The market doesn't want to buy cheaper Porsches for some reason."