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    Unsold Cayenne....Bloomberg.com

    Unsold Cayenne SUVs Could Hurt Porsche's Stock

    Aug. 21 (Bloomberg) -- Initial U.S. sales of Porsche AG's high-performance Cayenne SUV reveal buyers are choosing the most expensive options. The problem is not enough Cayennes are being sold, and those without the options are piling up.

    The inventory of unsold Cayennes may explain why the price of Porsches' preferred shares have declined almost 17 percent this year. The Stuttgart-based company's common stock is held privately.

    Porsche, as a matter of policy, refuses to discount its vehicles, thereby removing one possible means of reducing its Cayenne inventory. The company says it can't risk devaluing its cachet.

    The Cayenne represents a departure and a risk for an automotive brand that made its fortune building high-priced, low- slung sports cars. Porsche believes its long-term profitability will hinge on making inroads in unfamiliar market territory, one that is becoming so dominated by truck-based variants.

    Prior to March, when Cayenne went on sale in the U.S., automotive analysts openly wondered how many buyers would spend up to $90,000 for a vehicle more closely associated with soccer moms than race-driver wannabes.

    60-Day Supply

    As of July 31, U.S. sales of Cayenne were 1,354 for the month and 6,350 so far in 2003, boosting the automaker to a 15 percent sales gain for the year. Without Cayenne, Porsche's U.S. sales would have dropped 21 percent.

    Porsche said Cayenne sales are consistent with its projections. Still, the inventory of unsold Cayennes represents a 60-day supply ``which is unusual for us,'' said Martin Peters, a spokesman. ``We have to accept higher levels of stock, people want to order cars exactly to their liking.''

    In most instances customers must wait for delivery of Porsche models or choose from a limited inventory, which undoubtedly has contributed to the brand's mystique.

    ``We're off to a relatively slow start with the Cayenne, but modifying the content will help us gain momentum for this wonderful car,'' said Bob Snodgrass, owner of Brumos Porsche in Jacksonville, Florida.

    Peter Hennessy, co-owner of Hennessy Porsche in North Atlanta called the Cayenne ``a spectacular vehicle.'' The less expensive versions, he said, are running into competition from BMW's X5 sport utility ``that are $10,000 less than Cayenne when you consider all the discounts BMW is giving.''

    Air Suspension Popular

    The entry level, $56,000 version of the Cayenne -- with numerous luxury items such as leather upholstery -- doesn't come with air suspension. The air suspension has proven popular; it is installed as standard equipment in the $89,000 model, powered by a turbocharged engine.

    Continental AG, manufacturer of the $3,200 suspension option, hasn't been able to keep up with demand. The suspension controls the vehicle's height and makes the ride smoother.

    U.S. buyers also seem to favor the 19-inch and 20-inch wheels, selling as $2,100 options, rather than the standard 18- inch wheels. ``The bigger ones are scarce,'' said Snodgrass.

    Next month Porsche is expected to introduce a six-cylinder version of Cayenne, inviting inevitable comparisons with Volkswagen AG's new VW Touareg sport utility, which ranges in price from $35,000 to $50,000. Cayenne and Touareg bodies are identical and are manufactured at the same assembly plant in Bratislava, Slovakia.

    VW, after its first two months in the U.S. market ending July 31, reported 1,669 Touareg sales.

    Thinking Emblem

    Lehman Brothers, which is recommending Porsche's preferred shares, said on Aug. 8 that the ``stock price outlook depends principally on its earnings in the current 2004 fiscal year,'' which ends on July 31, 2004. The automaker is scheduled to post earnings for fiscal 2003 on Sept. 9.

    There is a consensus among equity analysts that Porsche will post earnings for the 2003 fiscal year of about 31.6 Euros ($35.20) per share, which would represent its ninth consecutive year of increasing profit -- something not even Toyota Motor achieved over the same period.

    Proving that Cayenne can be a consistent moneymaker won't be easy for Porsche. The lower-priced eight-cylinder version and the expected six-cylinder model will run smack into formidable competition from numerous competitors.

    The trick will be to hold on to the high-priced end of the luxury SUV segment and to convince others that the Porsche emblem justifies the price in the more competitive end of the segment. After all, the number of buyers who will shell out $60,000 and up for a new vehicle doesn't constitute much of a market.

    Re: Unsold Cayenne....Bloomberg.com

    It's nice to see the press report what the board posters have been saying for months. What surprises me is how fast the Pepper sales slowed, I expected that P would get two years of easy sales out of their base and new customers before the gravey train ended. They did get enough this year though to save them from a big financial hit due to the large drop in 996 and Boxster sales.

    Re: Unsold Cayenne....Bloomberg.com

    Quote:
    It's nice to see the press report what the board posters have been saying for months. What surprises me is how fast the Pepper sales slowed, I expected that P would get two years of easy sales out of their base and new customers before the gravey train ended. They did get enough this year though to save them from a big financial hit due to the large drop in 996 and Boxster sales.



    I'm still not sure that the Cayenne is a failure.
    Fact: the Cayenne is a very nice peace of SUV, one of the best (if not the best) SUVs on the market.
    The Cayenne Turbo is pretty lonely in it's class, it is a 2.3 ton SUV with the same performance (0-125 mph) of a 993 C2, pretty impressive.
    I know I repeat myself but if Porsche succeeds to overcome the 3 flaws (design, weight, price tag) of the Cayenne, I see a bright future for it.
    I'd choose the Cayenne over any SUV right now (well, with the exception of the Cadillac Escalade EX, Lincoln Navigator, etc. because I need more room for family ), especially the Turbo is actually the Cayenne who represents the name Porsche.
    Personally, I don't have any ambitions regarding off-road capabilities and track performance, I just need a high power SUV with fantastic performance, delivering fun and enjoyment to the driver, including moving the whole family.

    The problems for the Cayenne will start with the introduction of the new BMW X5 and Mercedes ML/GST.
    This is actually the real challenge for Porsche and I bet they already prepared for it (bigger Cayenne, more poweful engines... ).
    As long as Porsche sticks to the 997 with all development capacities and as long as they give everything they have for the new 911, I don't care about the Cayenne.
    But honestly, I'd like to see the Cayenne to be a full success.
    More money=more sports car variants and maybe even more new models.

    Re: Unsold Cayenne....Bloomberg.com

    I saw a VW Touereg the other day - a very handsome SUV - the best looking one in the US market to me - whose body is nearly 90 % indentical to the Cayenne, which is the one of the goofiest looking things out there. The classic tapered 911 " frog face " visually doesn't transfer well 4 feet up in the air to a truck body. Dynamically, it isn't a Cayenne , but even if the Cayenne Turbo were $60K , I wouldn't own one . I will not drive an ugly car at any price or performance . Same for the BMW 7 - and what a shame for both of these great driver's cars.

    Re: Unsold Cayenne....Bloomberg.com

    I was as adamant against the Cayenne as anyone. I thought it was ugly and resembled the Hyundi SUV. I could not understand why anyone would buy it.

    I then drove it and was sold. It is a great piece of machinary almost as a good as most sport cars but with a lot more cargo and passenger space. For value it is difficult to beat.

    Regarding its styling, I have owned the 996 Cab. and 360 Spider. The Cayenne gets more looks and compliments than my 996 ever did.

    This vehicle has "legs". Give it time; the word will get out.

    Re: Unsold Cayenne....Bloomberg.com

    I agree with you nberry

    Re: Unsold Cayenne....Bloomberg.com

    Quote:
    I was as adamant against the Cayenne as anyone. I thought it was ugly and resembled the Hyundi SUV. I could not understand why anyone would buy it.

    I then drove it and was sold. It is a great piece of machinary almost as a good as most sport cars but with a lot more cargo and passenger space. For value it is difficult to beat.

    Regarding its styling, I have owned the 996 Cab. and 360 Spider. The Cayenne gets more looks and compliments than my 996 ever did.

    This vehicle has "legs". Give it time; the word will get out.



    The Cayenne does resemble the Hyundai SUV. I have not driven a Cayenne yet, but I have driven a Touareg. I was not as impressed by the V8 Touareg as I was with the Infiniti FX45.

    Why is it important to you which car gets more "looks"? I stare at every Cayenne I see because I can't believe how ugly it is.

    Greg A

    If they really want to sell more of them....

    They can take a lesson from Mercedes. When the M-class came out, the wow factor took off, then peaked, then weakened. A year later, nearly every Mercedes dealer had 6 or more piled in the back lot....FOR LOANERS!

    As soon as all the soccer moms and others began toying around with their loaners, sales began to climb again.

    Seeing as there are SO FEW loaners whenever Porsche owners need service, they ought to find a way to get them into the loaner program. And yes, there are economies of scale quite different between M-class and Cayenne, but the base models sitting idle would do just fine.

    Sure, Mr. Service Manager, the Cayenne will be great to have for the day (or two or three).


    Re: Unsold Cayenne....Bloomberg.com

    Quote:
    Why is it important to you which car gets more "looks"? I stare at every Cayenne I see because I can't believe how ugly it is.

    Greg A




    I guess the Cayenne gets more looks because it is something new, rare and especially it is a Porsche SUV.
    But I'd like to ask all Cayenne critics to drive it for a few hours, especially the Turbo. You'll be impressed.
    BTW: I wouldn't call the Cayenne necessarily "ugly". It's design just doesn't look clean, smooth...can't explain it.

    Give Porsche a chance, this is the first Cayenne generation...I bet the second will look more refined.

    Re: If they really want to sell more of them....

    My soccer mom wife thinks the ML, X5, Range Rover , Touoreg, and FX45 are all nice looking rides. With no bias from me, every time she sees a Cayenne she goes out of her way to say how ugly it looks . If Porsche has plans to expand downward with a price leader V6 , you will get some non-Porsche intender buyers cross shopping the Lexus RX330, ML320, X5 3.0 who wouldn't know a good handling car but who will be very sensitive to comfort, do-dads ,resale, build quailty and customer service . This is where Porsche has to sweat as it watches hows it's independently owned dealerships compare to Lexus , MBZ, BMW in that regard.
    It's one thing for a die-hard Porsche nut to suffer yet another RMS leak , quite another for someone " trying out " Porsche ownership via conquest SUV sale for the first time. In that regard, I'm glad my dealer is a combined Porsche/MBZ store with same service advisor - I get a choice of Boxster S or ML 320 or C320 wagon as a service loaner each visit.

    Re: If they really want to sell more of them....

    My wife doesn't like the Cayenne either but hey, she bought a SLK 32 AMG for herself and I can't say that I like the SLK too much.
    I think that Porsche will be in serious trouble regarding the Cayenne with the introduction of the all new X5 and Mercedes M/GST. And if I look at how quality on US SUVs improved over the past two years, I think that US brands like Cadillac, Lincoln, GMC and Ford will offer some very interesting products over the next few years.
    The only thing I'm afraid of (for ALL SUV producers): rising fuel prices and a anti-SUV movement especially in the US (funny, the SUV gets more and more approval in Europe ).

    We shouldn't forget one thing however: Porsche didn't put much money in Cayenne development and they share a lot of parts with VW. So the risk of the Cayenne not being successful isn't actually a real risk for Porsche, the Leipzig factory isn't more than a "Lego-Workshop" (if you understand what I mean ) which can be changed to a full production facility (for the 4th model for example) any time.

    Re: If they really want to sell more of them....

    I believe most Porsche dealers have a Cayenne loaner program.

    Gary get real! Looks are important and subjective. You are being disingenuous to state otherwise. Just ask your wife.

    Warning re the terror group E.L.F. ...

    In California, a radical group called the E.L.F. ( earth-environmental liberation front ) has been going around torching SUVs ( another 50 at one dealership just the other day ) and spray painting SUVs all over the body and windows with slogans like " no guns for oil ( Iraq) " and E.L.F. They also target expensive SUVs in wealthy suburban parking lots and in front of homes in Southern Cal especially and have struck Hummer H2s , Escalades, Suburbans , new Range Rovers , MLs and X5s. They know about the $90K 450 hp Cayenne Turbo now , which pi**es them off the most as the ultimate $$$ and power SUV - so be forwarned down there ! ( they also recently struck in Santa Cruz, so they are attacking in Northern California now , too. )
    They also burned down a several hundred million dollar housing development under construction when I was in the San Diego area 2 weeks ago.
    Even the traditional environmental group Sierra Club calls them terrorists .
    Let's see what happens when they torch Governor Terminator's Hummer H1 in front of his Santa Monica mansion ! Hasta la bye-bye for now from California , your "entertainment "capitol of the world.

     
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