With this comes a strong change in communication strategy. Now an increasing part of the EV promotion comes through tech reviewers, instead of (or along with) automotive ones, and the two communities grow ever closer.

So, what does this partnership mean for Foxconn and the Chinese luxury market?

FOXCONN AUTOMOTIVE ASPIRATIONS

Foxconn is probably the most emblematic example of the change undergoing in the automotive industry and the new approaches that will define it. In the East, the tech giant is moving in different directions.

2021 alone saw numerous important announcements.

• In January it was announced a 50-50 Joint Venture with Geely Holding Group (Volvo, Polestar, Lotus, among others) to manufacture EVs for other companies.

• In late February, it was announced that in partnership with Fisker Automotive, Foxconn would manufacture up to 250,000 units of Fisker’s upcoming SUV Ocean, in its Wisconsin industrial plant.

• In May, another Joint Venture, this time with Stellantis, formed Mobile Drive. A division pooling the two Groups’ know-how to develop the next stage of electric vehicles’ digital features, interface, and user experience.

• July 6th saw the announcement of the MIH Consortium. A collaboration project involving numerous professionals within the automotive and electric mobility industries to create an open EV ecosystem with the intent of accelerating innovation, lowering the entry barriers to the sector, and promoting collaboration. This somewhat recalls what Google did for smartphones with Android.

• In August, the company acquired from Taiwanese Macronix (旺宏电子) a 6-inch semiconductors plant for TWD2.25 billion (£65.7 million). This will be crucial not just for Foxconn itself now that it has expansion aims into the automotive industry, but also for the entire industry as it still faces a serious chip shortage that hindered numerous manufacturers’ production.

• In September is the announcement of Foxconn acquired the former GM factory in Ohio from Lordstown Motors for $230 million (£167 million). In turn, it will produce the startup’s pick-up truck Endurance. This will allow the Taiwanese giant to establish its presence in the American automotive market even more, and let Lordstown adopt a less capital-intensive business model. Something that several automotive startups are adopting. Another sign of the industry’s change.

Last then is the announcement regarding the launch of the new luxury electric car designed by Pininfarina, and the wider brand Foxtron. The so-called Model E designed by the Italian coachbuilder, in fact, is just one of the three models that the tech firm intends to launch on the market. The other two called Model C and Model T will be a c-segment crossover and a bus for public transport.

The Model E will be destined to the high-end segment of the market and is teased as a refined, and business-focused car, elegant but still capable to deliver impressive performance (0-100 km/h in 2.8 seconds), with 750 hp and 750 km of range.

Pininfarina has worked both on the exterior and interior to convey the elegance synonymous with its brand, but also to integrate lots of technology. The car should feature every technical capability of a high-end modern EV. Seamless connectivity, electronically activated doors and windows, facial recognition, matrix lighting, and cutting-edge user interface. All of this serves specifically the rear passenger that (while being chauffeured) should be able to easily continue working as in a dedicated office.

THE CHINESE MARKET

Foxconn enters a market that is already extremely crowded in the East. While on the one hand, it has the scale advantage, being a tech giant and having already established numerous partnerships, on the other, even China the biggest automotive market in the world, where EVs are causing a proper revolution, is pushing for consolidation. And the space is already quite crowded with companies selling in the premium and luxury segments, that have already established their names or attracted consumers’ attention with tech and innovation.

CHINESE 2021 EV PREMIUM MODELS

In the picture below there are two clear winners. One is the SUVs Macan, selling 61,944 unitsand significantly improving on the previous year. Cayenne tops the sales at 62,451 cars delivered, but with a slight decrease over 2020. This is probably due to product life-cycle, but potentially also because Porsche’s electric line-up offers an appealing alternative. The second winner is in fact the Taycan family. These have reached an 28,640 units, up an impressive 161.7% on the same period in 2020. Naturally, a big part of this result has to be due to the addition of the Cross Turismo iteration. Along with being a more practical version of the regular Taycan, a similar pricing to Cayenne for all the trim levels, and the significant incentives in different countries (i.e. rebates for both private and company vehicles in the UK, or China where according to 工业和信息化部 – Ministry of Industry and information total incentives reached CN¥33 billion), are factors that are pushing Porsche buyers to opt for the EV instead of the traditional ICE.

The big news here though is that, so far, through 2021, the Taycan has surpassed the 911. While is not the first time over a single quarter, it is the first time over a YTD period. This however is not to say that the sports car did bad. Its sales increased by a sizeable 10.1% in 2021, making it the fourth model in the line-up.

PORSCHE SALES BY MODEL AND GROWTH % YOY (JANUARY TO SEPTEMBER 2021)

From a market share point of view, it is also interesting to observe how the regional markets are recovering from the 2020 hit. The most striking improvement has been recorded in America with a 29% growth (the US alone has increased its sales by 30%), followed by the APAC region with 12%. Europe instead has remained fairly stable.

PORSCHE’S REGIONAL MARKET SHARES (2020-2021)

WHAT WE KNOW SO FAR AND SOME OBSERVATIONS

Numerous Taycan owners report benefits of the EV ownership, going way beyond the initial purchase incentives. Several, especially when it comes to everyday use, report they do not see themselves ever switching back to an ICE car.

Porsche is releasing the EVs and the market has responded. Confirming that, as far as everyday cars go, the big shift to electric powertrains could come earlier than expected for many buyers. The combination of novelty, reduced ownership costs, good driving experience, and overall convenience are driving customers faster than some anticipated in certain countries.

So, following the market trends, the next EV by Porsche will be the smaller SUV Macan, likely coming in 2023. What is even more interesting though is a rumour started by a report of Car and Driver from a few weeks ago. It is said that the next in line for the “electric powertrain treatment” would be the 718 Cayman/Boxster, coming by 2024 and somehow teased by the Mission R seen at the Munich IAA show. This choice does not just make sense but could turn into a huge hit, for different reasons.

718 CAYMAN/BOXSTER SALES (2014-2020)

The 718 range has been stagnating for quite a few years now. Giving it a complete restyle, bringing it up to the most modern standards with new technologies and powertrain seems the best opportunity to shake up the segment bringing new interest especially in new generations.

The report quoted before claims that in China (Porsche’s biggest market by far as seen in the graph above), the average 718 buyer is around 31 years old. So, delivering an ‘affordable’ sports car that looks to appeal specifically to this generation could be the best strategic move to save this segment.

The second reason why a full-electric 718 could be a big hit is that effectively, as of now, there are no true competitors. Porsche, according to this rumour, would be focusing much of its efforts on weight reduction, with a 1655 kg target, significantly lower than the average current EV, while still delivering power close to the 911’s line. In Zuffenhausen though, they are not afraid of product cannibalisation because the two cars along with offering completely different technologies will also be marketed for different audiences.

If Porsche manages to release a similar vehicle in just over two years, it could really come to the market with few to no competitors and a product that significantly rejuvenates this segment.

NOT JUST AUTOMOTIVE: IMAKER

Porsche Ventures, the venture capital division of Porsche AG, has invested in iMaker, a Chinese startup specialised in the development of digital influencers and ecosystems. This is another initiative that shows its focus on the Chinese market and the new generations, but also its forward-looking attitude and which, has been perfectly expressed by an Italian automotive journalist who said: “Porsche has always been a company that sees the world five minutes ahead of anyone else”. President and CEO of Porsche China Jens Puttfarcken statement reflect this very concept too:

“In its role as a traditional sports car manufacturer, Porsche has always been the driving force behind change and innovation. We want to remain at the forefront of the automotive industry as we move into the digital age. The investment by Porsche Ventures is an important step in implementing our digital strategy and the start of an extended partnership with iMaker”

The strategic investment aims at creating an ecosystem to improve the user experience in future Porsche’s digital interfaces within the vehicles. The collaboration should contribute to providing new digital products and services and improving the overall digital journey.

*The digital influencer Ayayi created by iMaker is already quite popular in China’s 小红书 platform

*Source:The Information Network

The graphs show how in just five years, SUVs have already reached and slightly surpassed both GTs and Sports cars in the low-volume market.

The two graphs show also that differently from SUVs, other car classes in this segment peaked in 2018 and have been decreasing since. 2021, will surely be an improvement over 2020, but these models could take longer to just reach the 2019 levels.

Going a bit more in-depth, of the two categories, the sports cars are the ones that decreased the most, which could indicate another major trend. After all, most manufacturers are adding more practical models to their line-up to cater to clients who want the thrill of fast driving but still look for a car to be driven daily. Even the more focused one. McLaren launched its GT in 2019, and Lamborghini after the Urus, has confirmed that its fourth model will also be more practicality-oriented, perhaps a 4-door GT, and most likely full-electric.

ENGINE SIZES

When it comes to engines, apart from the fact that 2035 should see the definitive stop to any ICE car sales, environmental regulations have been already significantly affecting the sector for a while.

In 2021, Ferrari and McLaren which up until now fitted their car only with V12 and V8 (McLaren uses only the V8), both released their new mid-engine hybrid pairing the electric system with a much smaller V6.

However, despite the overall drop in sales of last year, the ratio, in the last three years, remained pretty much unchanged. Where some automakers like Ferrari, McLaren, and eventually Aston Martin have already released smaller engines, others are more likely to directly shift to full-electric powertrains in the next few years.

It is the case of Rolls-Royce, according to its CEO Torsten Müller-Ötvös. Similarly, at Lamborghini, the big V12 is considered a defining characteristic of the brand itself. So while the automaker has already released its first hybrids (Siàn and new Countach), they kept the same engine in each one of the models. The next in line will most likely receive the same treatment. The rumoured fourth model instead will probably be all-electric, based on the same platform of the Taycan.

If automakers manage to abide by the restrictions with these alternative strategies, we might keep seeing big engines in sports and luxury cars for quite a few years yet.

MARKET SIZES

Another interesting fact is observed by looking at the overall market sizes within the three major regions of EMEA (Europe, Middle East, Africa), APAC (Asia Pacific), and Americas.

All three regions have been growing steadily in the past years at a similar rate, with the Asian region getting only slightly closer to the other two. In 2020 however, with the pandemic as a major contributing factor, that ended up affecting more the US, than Asia, the sales of five companies (Aston Martin, Bentley, Ferrari, Lamborghini, McLaren) in the APAC region where for the first time, higher than those in the Americas.

Not all companies have the same reliance on Asian countries though. For instance, Ferrari, while selling a lot in China, relies more heavily on Europe and the US. Bentley on the other hand sold most of its cars in Asia last year. Nonetheless, after 2020, if this trend continues, it could give European low-volume manufacturers an additional reason to focus on Eastern markets.

One final ‘indirect’ observation, is that after looking at these data, 2021 will be even more interesting. It will certainly give an indication of how all of these aspects of the market are going to develop over the next few years with both the next generation of hybrid models coming to the market and the effect of the pandemic gradually disappearing.

Despite the growth of major players in China that are even starting to approach foreign markets, European, Japanese, and American established companies are the ones still spending the most in this crucial phase of the industry. Naturally, the mere size here is the most important factor for this. At the top of the chart are in fact all the world’s largest groups, with VW still towering over the others. However, while the majority gradually increased their spending between 2017 and 2019, 2020 shows clearly the negative effects of the pandemic. Except for a few, every company reduced quite significantly the R&D spending.

Toyota is the major exception to this, growing very close to Daimler in terms of investment size in 2020. Chinese automakers too have either further increased their expenses or only reduced them slightly, which might be a consequence of China’s quicker return to full-time activity after the lockdowns, even if they all start from a much lower basis.

Naturally, the vast majority of such investments are going into ACES technologies (autonomous, connected, electric, shared). In the last two years, every major automaker released a revised business plan focusing its resources in this direction, like VW’s ‘New Auto’ strategy, or Daimler’s ‘Ambition2039’.

After all, the shift is happening faster than expected. A forecast by Meticulous Research reported by Bloomberg claims that the EV market is expected to reach a $2,495 billion size by 2027 at a CAGR of 33.6%. As for the sales figures, the CAGR would be 21.7% to reach by the same year a total of 233.9 million vehicles.

Another observation that could be significant is that the two major American automakers, Ford and GM both gradually decreased their investments in 2019 already, before the pandemic. This could indicate a more conservative approach, considering also that the automotive industry has been slowing down since 2017. 

From the top line, we can observe all of Rimac’s major shareholders, and there is no real surprise there. Mate maintains a 35% stake in his company, so does Porsche at 22% and Hyundai at 11%. The remaining 32% sees other automakers such as Kia, Chinese battery manufacturer Camel Group and more.

In the next row of the chart, things start to get more interesting. We see, in fact, the entity called Rimac Group now, where Rimac Automobili stood. The group then splits into two separate units that despite remaining distinct from one another, will maintain their synergies where necessary.

The first one is Rimac Technology. This division will remain completely under the Rimac Group, and independent. This is, in the words of its founder, the initial and biggest competitive advantage the company had and perfectly complementary to the automotive business.

He spoke frequently about how the technological know-how has been the real game-changer that allowed the company to flourish and establish itself as a major player in this market, before the car itself. Rimac’s current model Nevera, whose production is set to start in the coming weeks, is in fact, entirely produced in-house. This expertise in EV battery and drivetrain manufacturing, as well as software development its components’ management is what brought in the partnerships with Pininfarina, Aston Martin, Koenigsegg, and many more. Expertise that without the opportunity for economies of scale with these deals, would be extremely difficult to maintain with Rimac’s low production number.

Most importantly in this case though, this is also what initially captured the interest of Porsche and ultimately led to the present partnership.

On the other side of the graph appears the real news. Bugatti-Rimac. The Joint Venture between the two automakers should bring together the best of Bugatti’s century-old history and automotive heritage with Rimac’s unprecedented boost of innovation.

The majority stake in Bugatti-Rimac will also stay under Rimac Group with 55%, the remaining 45% will be held by Porsche. Both the divisions then will be run by Mate Rimac himself, who stays as the CEO of Rimac Group. Porsche will have a role in the company support as an advisor.

The mission is clear. To bring Bugatti into its new century and secure its future, but it doesn’t end there. While both Rimac and Bugatti will keep producing their own hypercars, at their own headquarters near Zagreb, Croatia and Molsheim, France respectively (except for EV-related components for both brands that will be entirely developed and produced in Croatia), the strategic JV will combine the companies’ R&D efforts and other areas of development.

Being under Porsche, naturally, the German automaker will benefit as well from a consistent know-how and technology transfer that will help the development of future high-performance electric models.

WHY THIS JOINT VENTURE IS IMPORTANT

The shift toward electric mobility is happening faster than many predicted. The reasons are many, not just restrictive Governments’ environmental regulations. On the customers’ side, the novelty, performance, and features enabled by digitalisation, connectivity, and OTA updates have created a stronger appetite for electric vehicles and they are changing the customers’ preferences. According to a survey by McKinsey 45% of current car owners will consider buying an EV as their next vehicle.

*Monday’s presentation participants. In order from the left, Oliver Blume, CEO of Porsche AG, Mate Rimac, Founder and CEO of Rimac, Lutz Meschke, Deputy Chairman and Member of the Executive Board Finance and IT at Porsche AG

One above all, the recent partnership between Marques Brownlee (one of the most followed and respected YouTube personalities in the tech world) and Top Gear, for the review of electric vehicles. But there are many more.

*YouTube largest Tech Reviewers Video previews related to electric mobility and electric cars reviews

*Speed expressed in seconds

Third, Customers’ power might even increase due to the current changes in automotive. While the industry is quite consolidated around a few companies, the overall size of this market is relatively small too. So, in addition to the current alternatives, with established automakers moving toward electrification there are numerous start-ups entering the market. Thus, the available choices increase, even if with brands that have less strength.

Again, the survey conducted among luxury and supercar owners, Design, on a scale from 1 to 10, is rated on average as the most important factor affecting their purchase decision. 

2020 MAIN PREMIUM EV MODEL SALES

*Tesla reports Model S and Model X sales figures together
**Audi data accounting only for the first 9 months of the year
***New Data for Mercedes EVs coming on February 18th

Along with the good results shown in this graph, there are two important factors to keep in mind. The first is that except in its base version, Taycan is generally much more expensive than the competitors listed here (the new Tesla Model S and X Plaid come closer to it). Secondly, Model X, Audi E-Tron, and I-Pace are all in the small SUV or Crossover segment which is definitely more sought after these days. These two factors make the Taycan results even more impressive and more interesting the potential for the upcoming Cross Turismo.

This scenario is likely to change significantly in 2021 as a number of high-profile competitors have entered the market in mid to late 2020. Polestar 2, BMW iX3, Ford Mustang Mach-E to name a few.

Determined the Taycan noteworthy success, even within a competitive segment that is not the most popular nowadays, let’s have a look at how Porsche achieved this success. What kind of campaigns did Porsche employ for its first EV Promotion?

MODERN ONLINE MARKETING

Taycan like many other luxury vehicles, especially during 2020 with lockdowns and restrictions got a lot of visibility thanks to online reviews and driving tests. Since its release, in fact, it made the first page of pretty much every automotive social media outlet, not only for the novelty of being an electric Porsche but thanks to its characteristics. From the overall build quality far superior to that of its competitors to its driving capabilities.

Chris Harris, like others, in his review points out how the car driving dynamic and agility is superior to other electric vehicles and actually extremely close to the one in a regular Porsche ICE Sportscar despite its considerable weight.

Additionally, a consequence of the interest in the new drivetrain and technology started by Tesla’s success is that Taycan too caught the attention of a new audience that does not necessarily overlap with that of car enthusiasts. EVs have in fact grown in popularity among the tech fans community. Satisfying the needs and wishes of this new (and generally very young) audience can benefit Porsche by bringing in new potential clients and increasing brand loyalty.

These are crucial components of modern marketing for any luxury car. In the case of the Taycan though, there is more…

SOME UNIQUE MARKETING

I previously discussed the success of The Heist, the second most-viewed automotive video on YouTube, and a great example of the power of storytelling in automotive marketing that many other automakers are following. This is already quite a unique achievement and a display opportunity for Porsche.

The second one-of-a-kind initiative to promote Taycan has been realised in Seoul on the occasion of its launch in Korea. The show itself featured an extraordinary light show symbolising the futuristic look and technology employed for this car. What is even more surprising though, is that in the days leading up to the event, a lorry carried around through the city an installation with a 3D Hologram representing running horses. The idea comes from the name of the car which according to Porsche ‘can be roughly translated to mean soul of a spirited young horse’.

*Source:Porsche

While very impressive, this is not the last unusual campaign organised by Porsche to push the EV to maximum visibility. So here comes the Guinness World Records.

On two separate occasions, Taycan achieved World Records for the longest drift with an electric vehicle and the highest indoor vehicle speed.

On the first, driving instructor Dennis Retera completed 210 laps of a 200 metres circle, for a total of 42,171 Kilometres covered in 55 minutes. This specific record served also to showcase the potential of the rear-wheel-drive Taycan, produced exactly to enhance the fun and feeling of a true sportscar.

*Source:Porsche

The second record instead was set by racing driver Leh Keen reaching a top speed of 165.1 Km/h in an enclosed building. This time the AWD Taycan was used to maximise grip, acceleration, and crucially, deceleration, as the space available was limited by the Guinness World Record rules.

This was an important showcase of top performance. Complete trust in the vehicle’s capabilities on a tricky slick surface, allowed the driver to achieve the record on the first attempt.

*Source:Porsche

CONCLUDING THOUGHTS

Even though from an everyday performance perspective these achievements might not seem to mean much, this is different for car enthusiasts and will likely prove to be a smart move. Proving that a good electric sportscar is more than just straight-line speed, might help to convince current luxury performance car buyers that generally meet EVs with a certain scepticism.

If all the rest was not enough, this will at least be another way to record the Taycan on the history pages.

International Organisation of Motor Vehicle Manufacturers President Mr. Fu Bingfeng, elected at the end of 2019 to substitute Mr. Christian Peugeot, has commented on the current condition of the global automotive industry. The press release can be summarised into two main statements:

"While the situation is improving or even seems well controlled in many countries, much remains to be done. [...] At this critical moment, we must all work to turn the crisis into a new opportunity. We can seize this opportunity to work together and to foster a better ‘new normal’ going forward."

A couple of months later, some figures put the claims in a clearer perspective. 

So, is VW just getting rid of the automaker or accelerating its transition into electrification, or they have other reasons (financial difficulties after the crisis)? Is the same going to happen to Lamborghini and Bentley, the other luxury manufacturers under the VW umbrella?  

SOME BACKGROUND ON BUGATTI

With regard to Volkswagen Group’s expansion in the luxury segment, its most important year is 1998. It is in 98 in fact, that with Ferdinand Piëch and his aggressive expansion strategy VW completed the acquisition of Bugatti, Rolls-Royce Bentley, and Lamborghini. You can check the article How VW turned Lamborghini into the success it is today? to know more about the latter.

Later, after a few concepts commissioned to Giugiaro at Italdesign, in 2005 the company finally began the delivery of its first production model, the Veyron 16.4. After that, the Chiron followed in 2016, and various limited editions, such as Grand Sport, Super Sport, and Pur Sport.

In the automotive space, Rimac does have a few competitors. I went into detail on the electric hypercar niche in a previous article here. Without considering the more traditional companies such as Aston Martin, Ferrari, McLaren, or Lamborghini that are gradually transitioning toward electricity, these last few years have seen several companies presenting their own version of a luxury performance EV. Lotus, Nio, Pininfarina, and more. 

But by looking at the bigger picture, the situation is quite different. It is indeed in its business model. The cars, along with being the company’s major product, served also the second purpose of showcasing the potential of an electric powertrain.

Two are the main factors that set Rimac apart from any other company right now.

First and foremost, is the firm’s expertise built through countless cycles of trial and error. In the CEO’s words “In less than a decade we have built up a comprehensive know-how in developing high-performance electric powertrain and battery technology, innovative infotainment, and telemetry systems and many other core vehicle systems. Our hypercars are at the pinnacle of technology, redefining the idea of the supercar”(Source: Rimac Press). Such unmatched know-how in this growing niche in turn translates into a number of quality partnerships.

*Rimac C_Two Powertrain Components ©Rimac Media