Porsche (with Doug DeMuro)

Summary Notes


In this episode of Acquired, hosts Ben Gilbert and David Rosenthal, along with car expert Doug Demiro, delve into the remarkable story of Porsche. They explore the brand's evolution from its controversial Nazi-affiliated origins and Ferdinand Porsche's engineering prowess to its current status as a luxury car icon, balancing supercar performance with everyday drivability. Despite family drama and near financial ruin in the '80s, Porsche's strategic product expansion, including the introduction of SUVs like the Cayenne and embracing electric vehicles with the Taycan, has propelled the company to an impressive market cap. The episode highlights Porsche's ability to maintain its heritage and enthusiast appeal while successfully navigating market shifts and broadening its product lineup to become one of the world's most valuable automotive brands.

Summary Notes

Pronunciation of Porsche

  • The correct pronunciation of the brand is debated, with variations like "Porsche" and "Porsche".
  • The family associated with the brand pronounces it more like "Porsche".
  • The pronunciation can be influenced by a German accent, leading to variations.

"It's definitely Porsche." "Definitely don't say Porsche." "The family says it more like Porsche." "If you say Porsche with a German accent, it comes out like Porsche."

The quotes highlight the nuances in pronouncing the brand name Porsche, emphasizing the correct version as used by the family and influenced by the German language.

Introduction to Acquired Podcast Season 12, Episode 6

  • The episode focuses on the story of Porsche, with parallels to the LVMH episode.
  • Porsche is unique for its luxury brand status and its cars' suitability as daily drivers.
  • The average Porsche costs around $110,000, and the company produces 350,000 cars per year.
  • The episode will explore Porsche's history, including family drama, corporate complexity, and its evolution.
  • The story includes elements from WWII, the creation of the first electric vehicles, and the 1980s luxury brand trends.

"Welcome to season twelve, episode six of Acquired, the podcast about great technology companies and the stories and playbooks behind them."

The quote serves as an introduction to the episode's theme, setting the stage for the exploration of Porsche's history and significance in the automotive industry.

Doug Demuro's Involvement and Background

  • Doug Demuro is a guest on the podcast, known for his car reviews on YouTube.
  • He has worked at Porsche corporate and is an enthusiast of the brand.
  • The episode is being filmed in his garage, featuring his Porsche Carrera GT.

"And if you like quirks and features, you're going to be pumped about our partner in crime to help us tell this story, Doug Demuro."

The quote introduces Doug Demuro as a significant contributor to the episode, leveraging his expertise and passion for Porsche to enrich the discussion.

German Engineering and Historical Context

  • German engineering is not just a marketing phrase but has deep historical roots.
  • Germany and Austria have a history of scientific achievements and Nobel laureates.
  • The country's automotive history includes inventors like Siegfried Marcus and Carl Benz.
  • The creation of Mercedes-Benz and its significance in the automotive industry is discussed.
  • Ferdinand Porsche's contributions to the industry are acknowledged, despite his Nazi affiliations.

"So there's a pretty long and incredible history of science and engineering in Germany and Austria." "Germany had produced more Nobel laureates in scientific fields than any other nation in the world." "Germany definitely did create the first successful production consumer automobile."

These quotes provide context for Germany's rich history in science and engineering, setting the stage for the emergence of Porsche as a significant player in the automotive industry and the complexities surrounding its founding figures.

Ferdinand Porsche's Early Career and Nazi Association

  • Ferdinand Porsche was recruited by Daimler and became a significant figure in the automotive industry.
  • He had a vision for a small, affordable car for the masses, which led to the creation of the Volkswagen Beetle.
  • Porsche's association with the Nazi regime and Adolf Hitler is acknowledged as a dark part of history.
  • Ferdinand Porsche and his family's move to Stuttgart positioned them at the center of the German auto industry.

"Ferdinand Porsche and many other folks in the family and in the early Porsche and Volkswagen, as we will see days, were also huge Nazis." "Ferdinand himself not just was a Nazi, but was a very close personal associate of Adolf Hitler."

These quotes acknowledge the troubling association between Ferdinand Porsche and the Nazi regime, providing a critical perspective on the history of the Porsche brand and its founders.

The Creation of Volkswagen and Porsche's Role

  • Ferdinand Porsche's concept for the Volkswagen Beetle was initially rejected by Daimler Benz.
  • He left Daimler Benz and started a consulting firm, which eventually led to the design of the Beetle for Volkswagen.
  • Adolf Hitler's involvement in founding Volkswagen is discussed, highlighting the brand's origins during the Nazi era.
  • The Beetle's significance and its production history are examined.

"That contract would be to design Ferdinand's vision, the small, affordable car for the people, a Volkswagen." "Adolf Hitler founded Volkswagen."

These quotes emphasize the significant role Ferdinand Porsche played in the creation of the Volkswagen Beetle and the controversial origins of Volkswagen under Adolf Hitler's regime.

Post-WWII Rebuilding and Porsche's Evolution

  • Post-WWII, the Porsche family had to rebuild their business and navigate the new political landscape.
  • The British military's role in Volkswagen's post-war revival is highlighted.
  • Porsche's decision to create a new sports car, the Porsche 356, is discussed as a pivotal moment in automotive history.
  • The Porsche family's strategic decisions led to the growth of both the German and Austrian branches of the company.

"Ferry Porsche said later in a 1972 interview, I saw that if you had enough power in a small car, it is nicer to drive than if you have a big car, which is also overpowered." "Louise and her children turn that into this huge. The largest car dealer network in Europe."

These quotes illustrate the strategic vision of Ferry Porsche in creating a new sports car and the entrepreneurial success of Louise Porsche in building a vast dealership network, marking key developments in Porsche's post-war evolution.

Porsche's Involvement in Racing and Brand Image

  • Porsche's investment in racing is discussed as a significant aspect of the brand's history.
  • The blurred lines between consumer cars and professional racing in the early days are highlighted.
  • The Porsche 550 Spider's connection to James Dean and its legendary status are mentioned.
  • The brand's philosophy of creating versatile, high-performance cars is emphasized.

"We have the only car that can go from an east African safari to Le Mans, then to the theater, and then to the streets of New York." "The 550 Spider was for people who were really like, let's go racing and do it."

These quotes capture Porsche's unique position in the automotive world, offering cars that blend high performance with everyday usability, and the 550 Spider's role as a symbol of the brand's racing heritage.

Porsche's Popularity and American Market Impact

  • Porsche's popularity in America surged due to its racing success and celebrity endorsements.
  • In 1954, Porsche sold 588 cars in the U.S., which was 40% of their production.
  • The U.S. market remained a significant portion of Porsche's sales over time.

"So, in 1954, Porsche sells 588 cars in the US, which was 40% of their entire production for the year."

This quote highlights the unexpected early success of Porsche in the American market, which became a substantial part of their sales.

European Sports Car Market Dynamics

  • Numerous European sports car startups existed during Porsche's early years.
  • Many startups failed after brief periods of racing and car sales.
  • Porsche's survival and growth were not guaranteed and were seen as unlikely.

"The number of sports car startups happening in Europe at this time was significant, most of which listeners, viewers will never really heard of, because they died."

The quote emphasizes the competitive and volatile nature of the European sports car market when Porsche was establishing itself.

Porsche's Financial Stability and Strategy

  • Porsche's financial stability was bolstered by royalties from the Beetle.
  • This steady cash flow allowed Porsche to invest in speculative ventures like racing.
  • The Beetle's popularity encouraged Porsche to reinvest in its development.

"We could be speculative because we know we got the money coming in. And Beetle continues to be more and more and more popular."

This quote explains how the Beetle's success provided Porsche with the financial security to take risks in other areas of their business.

Evolution of Porsche's Car Models

  • The Porsche 356 was considered not quite a modern car.
  • Competition from other sports cars led to the development of new models.
  • Porsche 911's development was influenced by the cancellation of a sedan project and the introduction of a new engine.

"In 1962, Ferry Porsche makes the decision. Like, 356 is amazing. Rebirth of the company. We got to invest profits and replace it with a new model."

This quote signifies the strategic decision to innovate and replace the Porsche 356 with a new model, leading to the creation of the 911.

The Porsche 901/911 Naming Story

  • The Porsche 911 was originally named the 901.
  • Peugeot's trademark on car model names with a zero in the middle led to the change to 911.
  • Porsche's model numbers often reflect engineering project numbers, though not always sequentially.

"The 911 is only called the 911 because Peugeot, of all companies, had a trademark in France for any car with a model name of any number, any roman number with a zero in the middle, and then any other number."

This quote explains the unexpected reason behind the iconic Porsche 911's name, which was due to a trademark issue with Peugeot.

The Porsche 914 Development and VW Partnership

  • Porsche and VW collaborated on the 914 as a joint project.
  • The 914 was meant to be an entry-level mid-engine roadster.
  • VW's change in leadership led to the 914 being branded solely as a Porsche.

"In 1967, Porsche kicks off a joint project with Volkswagen to produce a new mid engineed roadster, which is a smaller, more compact car and mid engineed, not rear engineed, called the 914."

This quote details the collaboration between Porsche and Volkswagen in developing the 914, marking a significant partnership between the two companies.

Porsche's Sales and Market Segmentation

  • The Porsche 911 and 912 catered to different market segments.
  • The 911 was priced higher and targeted performance enthusiasts.
  • The 912 served as an entry-level model with a four-cylinder engine.

"So ferry starts thinking like, okay, and this was part of the plan all along, I think let's create a whole new model, the old 356. We're going to bifurcate it."

The quote indicates Ferry Porsche's strategic thinking in segmenting the market with different models to cater to both entry-level and performance-oriented customers.

Porsche's Near-Death Experience and Recovery

  • Porsche faced severe financial challenges in the late '80s and early '90s.
  • The company's market cap fell below €400 million, and they were close to bankruptcy.
  • Porsche's turnaround involved maintaining the 911 production and expanding their portfolio.

"At one point, Porsche's market cap was less than €400 million."

This quote underscores the dire financial situation Porsche faced, with the market valuing the company at a critically low level.

The Porsche 959 and Outsourced Projects

  • The Porsche 959 was a technological testbed and Porsche's first supercar.
  • Economic struggles led Porsche to take on projects for other manufacturers.
  • Porsche produced cars for Mercedes-Benz and Audi, including the Mercedes 500 E and Audi RS2.

"Porsche was so desperate, though, that they started taking on projects for other manufacturers."

The quote reflects Porsche's desperate measures to stay afloat by taking on manufacturing projects for other car brands during their financial crisis.

Porsche's Relationship with Mercedes-Benz and the 500 E Project

  • The 500 E project was a critical moment for Porsche.
  • Porsche was facing difficult times and Mercedes-Benz provided a project to keep Porsche's factory workers employed.
  • Mercedes-Benz could have built the 500 E themselves but chose to involve Porsche to help them during their tough times.
  • The project involved Porsche acting as a contract manufacturer for Mercedes-Benz.

"Ladies could have built that car, but their brothers in Stutgart down the street were having really tough times. Here's a project that you can work on to keep the factory workers going."

The quote emphasizes the camaraderie between Mercedes-Benz and Porsche during a challenging period for Porsche, with Mercedes-Benz offering a lifeline project to sustain Porsche's workforce.

Porsche's Financial Struggles and Recovery

  • Porsche was in a financially precarious position during the 80s and early 90s.
  • The company was close to failing, which is often overlooked by those who see Porsche as a manufacturer of luxury cars.
  • The tough era involved minimal profitability and was a significant challenge for the company.

"It was, like, indescribably tough. And I think this is lost on a lot of younger people who have only seen Porsche in the world of crazy expensive cars and all the money they charge for colors now and all that, there was a period where it almost all came to."

This quote highlights the severity of Porsche's financial difficulties, contrasting it with the current perception of Porsche as a successful luxury car brand.

Introduction of Statsig as a Sponsor

  • Statsig is a feature management and experimentation platform for product teams.
  • It allows for faster shipping of features, automated A/B testing, and impact analysis on business metrics.
  • Statsig supports data-driven product decisions and is used by major companies like Notion, Brex, and Microsoft.
  • The platform is particularly useful for AI feature rollouts.

"Statsig is a feature management and experimentation platform that helps product teams ship faster, automate A B testing, and see the impact every feature is having on the core business metrics."

This quote describes the core functionality of Statsig, emphasizing its role in enhancing product development and feature testing processes.

Porsche's Brand Heritage and Strategy

  • Porsche has a strong heritage and consistent design language, particularly with the 911.
  • The company focuses on gradual improvements over time rather than drastic changes.
  • Porsche aims to maintain brand loyalty by allowing customers to continue loving the brand through consistent delivery on its heritage.

"There's this obsession with if you loved Porsche in any given year, we want to make sure that we keep you along for the ride and you can continue to love us today."

The quote reflects Porsche's commitment to its heritage and the desire to maintain long-term relationships with its customers by staying true to its brand identity.

Vendolin Wiedeking's Impact on Porsche

  • Vendolin Wiedeking became CEO of Porsche in 1993 and implemented the Toyota production system.
  • He streamlined Porsche's product lines, focusing solely on the 911 initially.
  • Wiedeking revived the concept of the mid-engine roadster with the introduction of the Boxster, sharing components with the 911 to enhance its appeal.
  • His strategy was to make the entry-level Porsche a desirable product rather than a second-class option.

"We didn't want to flee from the competition into higher prices, meaning, like, not be in the entry level market at all. We don't want to be Germany's Ferrari. We don't want to be a big fish in a pond that's shrinking, but rather a growing fish with more room to move in a larger lake."

This quote summarizes Wiedeking's strategy of expanding Porsche's market presence without compromising the brand's prestige, aiming to grow in a larger market segment.

Porsche's Expansion and the Introduction of the Cayenne

  • Porsche expanded into the SUV market with the introduction of the Cayenne.
  • The Cayenne was controversial but became a significant success for Porsche.
  • Porsche's entry into the SUV market did not dilute its brand equity but instead increased it, alongside investments in performance models.

"Porsche starts a new, whole new production facility in a new part of Germany, in Leipzig, to make it, and then ultimately, shortly thereafter makes this car, the GT. At the same production facility."

This quote indicates Porsche's strategic move into new product lines and facilities, demonstrating its ability to diversify while maintaining its performance car heritage.

The Carrera GT and Porsche's Supercar Legacy

  • The Carrera GT is considered one of the greatest driving cars ever built.
  • It is an analog supercar with a manual transmission and minimal driver aids.
  • The Carrera GT's powertrain was developed for racing, making it a unique offering in the road car market.

"The Carrera GT, in my mind, is the greatest driving car ever built."

This quote captures the esteem in which the Carrera GT is held, highlighting its status as a pinnacle of Porsche's engineering and design philosophy.

Porsche's Takeover Attempt of Volkswagen

  • Porsche attempted a takeover of Volkswagen by acquiring a significant share of VW's stock.
  • The move led to a short squeeze, temporarily making VW the most valuable company in the world.
  • The financial crisis and subsequent events led to Porsche's inability to sustain its position, resulting in VW's acquisition of Porsche.

"We believe, and they say that they have to say this because Porsche is a greater than 50% owner of VW, and so they have to disclose this to the market and that as a result of this extraordinary circumstance, VW, led by Ferdinand, is willing to bail out their partner, Porsche and save them by purchasing the Porsche operating company for the neighborhood of three to €4 billion."

This quote outlines the dramatic turn of events where VW, under Ferdinand Piech's leadership, positioned itself to acquire Porsche after Porsche's failed takeover attempt, effectively reversing the power dynamics between the two companies.

Porsche's Continued Success and Innovation

  • Despite the financial and ownership turmoil, Porsche's car business remained robust.
  • Porsche continued to innovate with models like the 918 Spider, a plug-in hybrid supercar.
  • The company's approach to supercars is strategic, using them to introduce new technologies and reinforce brand values.

"It's a short model run. So this car, they made 1270, which is considered a lot for a supercar, the 918, they only made 918 units, and in fact, that was considered a lot for a supercar."

This quote sheds light on Porsche's approach to supercar production, emphasizing exclusivity and the use of supercars as a showcase for technological advancements and brand prestige.

Energy Costs and Data Centers

  • Data centers in remote locations benefit from lower energy costs due to local energy availability.
  • Hyperscalers like AWS, Google, and Azure build data centers near major traffic hubs due to their cloud services.

"It's super cool that they can put their data centers out there in these remote locations where quote unquote energy happens, as opposed to the other hyperscalers such as AWS and Google and Azure who need to build their data centers close to major traffic hubs where the Internet happens because they are doing everything in their clouds."

The quote emphasizes the strategic advantage of placing data centers in energy-rich remote locations as opposed to the traditional model of building near internet traffic hubs for cloud services.

Crusoe Cloud Services

  • Crusoe Cloud offers lower cost and more performant infrastructure for AI workloads.
  • Companies can utilize Crusoe's services to leverage the benefits of remote data centers.

"If you, your company or your portfolio companies would like to use the lower cost and more performant infrastructure for your AI workloads, go to crusoecloud.com slash acquired."

This quote is a direct call to action for companies interested in optimizing their AI infrastructure costs and performance through Crusoe Cloud services.

Porsche's SUV Success and VW Group Synergy

  • Porsche's Macan, a compact SUV, is a huge success in America and China.
  • The Macan and Cayenne share a lot of Volkswagen components, including engines across multiple model lines.
  • The Cayenne Turbo engine is used in various high-end models across the VW group.

"So this is perfect to wrap up on the history of Porsche here as part of the VW group, they come out with the Macan, which is a huge success both in the America and China."

The success of the Porsche Macan as part of the VW group signifies the brand's strategic move into the SUV market and its international appeal.

Porsche's Engineering Shift and EV Innovation

  • Porsche's move to share engines across VW group brands is a departure from its independent engineering heritage.
  • The introduction of the Mission E concept in 2015 marked Porsche's early foray into electric vehicles (EVs).
  • Nations and companies were slow to adopt EVs, with Japan and Toyota notably lagging.

"But to operate today with, you have to be part of this. So the Macan is a big hit. And then we just alluded to it with the tycoon. The mission e is the concept that they introduced in 2015."

The quote highlights the necessity for Porsche to integrate within the larger VW group to continue its success and innovate with concepts like the Mission E, paving the way for future EVs.

Global Shift to Electric Vehicles

  • Porsche's Taycan, an electric sedan, was initially met with skepticism but became well-received.
  • The choice to launch a sedan instead of an SUV as an electric model may have been a mistake given market trends.
  • Porsche is well-positioned in the EV market, with plans for an electric Macan and other models.

"In fact, entire nations were like, japan is five years behind everyone in electrics. It's the weirdest thing. It's like they just woke up last year and were like, oh, my God."

This quote reflects the observation that some nations, like Japan, have been slow to adopt electric vehicles, which has implications for the global car market and manufacturers' strategies.

Performance Characteristics of Electric Supercars

  • Electric vehicles, including the Taycan, offer incredible acceleration.
  • Future supercars will push the limits of performance, but the democratization of power means even non-luxury electric vehicles can achieve remarkable speed.
  • The definition of a supercar is challenged by the performance capabilities of more accessible electric vehicles.

"The thing about electric cars is they all can accelerate incredibly well. And that's, like, insane. And tycoon is faster than this. It's faster than everything it does. Zero to six in like 2 seconds."

The quote discusses the exceptional acceleration of electric cars like the Taycan, which challenges traditional notions of supercar performance.

Porsche's IPO and Market Position

  • VW Group's re-IPO of Porsche was the largest European IPO of all time, reflecting substantial market value.
  • Porsche's financial separation from VW is complex due to shared operational costs and platforms.
  • Porsche AG and Porsche SE are both available for investors, with the latter representing the Porsche family's control over VW and Porsche.

"The Porsche Reipo is the largest european IPO of all time. The initial market cap of Porsche at trading was about $75 billion."

This quote underlines the significant market capitalization and investor interest in Porsche following its re-IPO, showcasing the brand's financial strength.

Porsche's Sales, Revenue, and Brand Perception

  • Porsche's revenue is heavily supported by SUV sales, with China being a major market.
  • The brand maintains a luxury image despite the volume of SUVs produced.
  • Porsche's gross margins are strong for the auto industry but not as high as luxury goods or technology companies.

"Last year, they delivered about 350,000 cars, man. So this really is a scale organization at this point."

The quote indicates that Porsche, while maintaining a luxury brand image, has reached a production scale comparable to mass-market brands, which affects its market perception and financials.

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