Find out why the Stuttgart-based automaker remains particularly vulnerable in the event of a trade war
by Khris Bharath on July 19, 2024, 20:30The U.S. election is around the corner and depending on who takes the chair at the White House in 2025, it could have significant implications for global trade. A potential trade war between the U.S. and Europe could throw a wrench into your German luxury car dreams. By wrench, we mean a giant price hike that could make your wallet whimper. German brands after all dominate the luxury car market in North America, a key market for Porsche, second only to China. Brands like Porsche could be caught in the crosshairs because unlike their rivals with fancy U.S. factories (looking at you, BMW and Mercedes), the Stuttgart-based automaker relies solely on imports. This means tariffs from Uncle Sam could send Porsche prices soaring. Here’s a glimpse into how this trade spat could impact the iconic German brand, along with some strategies that could potentially help in mitigating these risks.
The Repercussions Of Higher Tariffs
While the focus these days is imposing tariffs on Chinese E.Vs, you can’t rule out the possibility of tariffs on European-made goods soon. As we already know from the Trump administration’s previous term, the idea of a 20-25% hike in tariffs on cars imported from the E.U. isn’t new. Something along those lines would translate to tens of thousands of dollars more for your dream Porsche. Sure, die-hard fans might still budge and shell out, but those eyeing a Cayman or Macan as their weekend warrior? Currently, the cheapest new Porsche you can snag is the Macan, starting at around $88,000. We’re talking about a potential price jump of over $20,000! That might make even the most loyal Porsche enthusiasts wince.
While new car sales might take a nosedive, the used market for Porsche could see a boom. We already saw how that played out during the pandemic. With new Porsches becoming unicorn-rare, folks will likely be snatching up well-maintained pre-owned examples. This might be good news if you’re trying to offload your old Panamera, but a saturated market would eventually lead to a price correction, so don’t get too excited. But in the end, Porsche’s thing is all about exclusivity and performance. A price increase might make them even more unattainable for most folks than they already are today. But this could really push them out of reach for a bigger pool of buyers diluting the brand’s accessibility.
A Possible Solution To Porsche’s Dilemma
But here’s a strategy Porsche should seriously consider. They’re part of the larger Volkswagen Group, which has factories scattered around the globe, including the United States. While it’s highly unlikely that manufacturing of the 911 or Boxster would happen outside of Germany, why not move some production of mainstream models (honestly, no Porsche is truly mainstream)– think Cayenne, Macan, Panamera – to an existing VW facility in the U.S.? It leverages existing infrastructure in Chattanooga, Tennessee, and expertise within the VW family, making it way easier than starting from scratch.
For example, their Jetta and Passat sedans are both consistently well-regarded and competitively priced. That’s because they’re built right here in America, which keeps a lid on costs. By following a similar strategy, Porsche could potentially offer some of their bread and butter models at a more attractive price point, even with tariffs in play. Alternatively, Porsche could even explore the CKD (Completely Knocked Down) production model, where parts are shipped from Germany for final assembly at a U.S. facility.
Also, this whole trade war mess could actually be a win for Porsche’s electric models like, the Taycan and more recently, Macan. The U.S. government throws serious dough at EVs in the form of incentives and tax breaks. By building the Taycan Stateside, Porsche could be in a position to snag those sweet subsidies and make the electric sedan more attractive to eco-conscious buyers. If you choose to take the used car route, the Taycan seems to represent excellent value right now.
The Takeaway
Now this situation might require some serious finesse from Porsche. They might have to take a hit on their margins to keep their prices competitive. They could also revamp their marketing to focus on the heritage and exclusivity that comes with owning a Porsche, making that steep price tag seem a little less scary. The bottom line is, that these U.S. tariffs are a hypothetical threat to Porsche’s market position, in the luxury car market in America. But by leveraging the VW Group network, exploring CKD options, and potentially capitalizing on U.S. EV incentives, Porsche could weather this storm and keep building those automotive masterpieces we all know and love. Just don’t expect your next Porsche to come cheap, unless you’re into the whole used car thing.
Khris Bharath
Khris is a Mechanical Engineer and a classic car aficionado, who adores his Jags, Alfas, and old-school American muscle cars. He keeps tabs on everything from super exotics like an old EB 110 to the latest from Lucid and geeks out on three-row family haulers. Formula One remains very close to his heart, and he diligently makes time to tune in for the Grand Prix on Sundays. Khris also loves his road trips and he prefers a stick shift over an auto. Read full bio