Why legacy car companies should go goodwill hunting

VOLKSWAGEN is having a miserable year largely thanks to Porsche, which it listed in 2022 while keeping a 75 per cent stake. In September, VW took a six billion euro (US$6.7 billion) goodwill impairment on Porsche, the biggest item in a profit warning that cut its margin forecast to 1 per cent at most.

Porsche’s first-half performance was grim. Year-on-year deliveries fell 16 per cent to 122,306 cars. Sales in China, once its biggest market, sank 32 per cent. Every Porsche model line saw numbers decline – except one.

Sales of the 911, the iconic sports car whose name and silhouette have been around for 62 years, rose 19 per cent to 30,534 units, enough to account for a quarter of Porsche’s overall sales.

In contrast, the Taycan, the electric car Porsche itself feted for once outselling the 911, saw its sales drop 25 per cent.

This triumph of the tried-and-true over the bold-and-new presents a lesson for legacy car companies.

A 911 buyer is not merely making a new car purchase, but buying into six decades of continuity. That sort of pedigree is the one advantage China’s car makers cannot replicate quickly.

Arguably, the Chinese have surpassed legacy brands on technology. The new guard trounce the old on price, and move with breathtaking speed.

Chinese cars are heading towards 18-month development cycles, less than half the time it typically takes a Western car company to conceive and gestate a new model.

The old guard is learning. Renault, which does not sell cars in China, opened a development centre in Shanghai to tap Chinese engineers and suppliers.

Its new Twingo went from kick-off to production in 100 weeks. But more to the point, it borrows not just its name but also its cheeky face and one-box form from a model that charmed Europe in the 1990s.

Similarly, the Renault 5 is a 1972 nameplate reborn as an electric hatchback. It has sold more than 100,000 units since launch and is Europe’s best-selling small electric vehicle.

Citroen, too, is reviving the 2CV as an affordable electric car. Yet there are many names in the heritage cupboard still to be dusted off: whither a new Audi Quattro, Ford Escort, Peugeot 205, Volkswagen Beetle or, looking to the East, a Mitsubishi Lancer or Nissan March?

Investing in heritage

Exploiting heritage is not merely a case of bolting an old badge to a new car, however. To be successful, a revived nameplate has to evoke fond memories of the original.

Ford resurrected the “Capri” name, which originally adorned a rakish and budget-friendly coupe, by attaching it to an electric SUV built on Volkswagen underpinnings. The new Capri relates little to the original, and predictably, demand has been slow.

Such flailing cynicism is merely spending heritage, not investing it.

Where the Chinese have wanted heritage and reputation, they have purchased it rather than waiting to accumulate it.

Geely owns Volvo and Lotus. SAIC turned MG, a bankrupt British marque, into an export success.

Of course, Porsche’s current woes show that having an icon to lean on is not a silver bullet against the industry’s wider challenges. But when the market turned this year, the 911 was the only Porsche whose sales grew.

China can develop almost any kind of car in 18 months, but not one with six decades of reputation.