Fast cars and fast bucks
What gets the heartbeats of the well-heeled racing? Speedy cars and stock market killings probably feature high on the agenda. The initial public offering (IPO) of Porsche is well set to deliver flutters on both counts when shares start trading on Frankfurt’s stock exchange this week.
With a predicted valuation of EUR €75bn (USD $72bn), the emergence of the German sports carmaker from its owner, Volkswagen, would count as the fifth-largest float in European history.
Challenges to the carmakers
However, automotive industry titans are facing major supply chain challenges, not to mention high fuels costs affecting their use.
Global IPOs have been worth £97bn so far in 2022, compared with £320bn last year, according to the data company Dealogic. In Europe the difference is even starker, with floats worth a paltry £4.8bn this year, compared with £48bn in 2021.
Volkswagen needs the money, that much is clear. It could receive as much as €19.5bn in the deal (although it will pay out nearly half as a special dividend). The world’s second-largest carmaker by volume has gone all-in on creating electric cars, chastised by the fines and reputational catastrophe of the diesel emissions-cheating scandal. That electrification surge means it needs funds to refurbish its many factories.
Industry innovations
Digitization, increasing automation, and new business models have revolutionized other industries, and automotive will be no exception, according to a recent McKinsey report.
These forces are giving rise to disruptive technology-driven trends in the automotive sector: diverse mobility, autonomous driving, electrification, and connectivity.
View from the windscreen
Driven by shared mobility, connectivity services, and feature upgrades, new business models could expand automotive revenue pools by about 30%, adding up to $1.5 trillion, say experts.
The automotive revenue ballpark will significantly adapt and diversify toward on-demand mobility services and data-driven services. This could create up to $1.5 trillion or 30% more in additional revenue potential in 2030, compared with about $5.2 trillion from traditional car sales and aftermarket products/services, up by 50 percent from about $3.5 trillion in 2015.
The increasing speed of innovation, especially in software-based systems, will require cars to be upgradable. As shared mobility solutions with shorter life cycles will become more prevalent , consumers will be aware of tech advances, that will further raise demand for spec upgrades in privately used cars as well.
Our take
While it’s hard to deny the attractiveness of a luxury brand like Porsche to investors, it’s also about where the industry is heading. Overall global car sales look set to continue to grow, but the annual growth rate is expected to drop. This drop will be largely driven by macroeconomic factors and the rise of new mobility services such as car sharing and e-hailing.
New mobility services may result in a decline of private-vehicle sales, but this decline is likely to be offset by increased sales in shared vehicles that need to be replaced more often due to higher utilization and related wear and tear.
Stricter emission regulations, lower battery costs, more widely available charging infrastructure, and increasing consumer acceptance will create new and strong momentum for penetration of electrified vehicles (hybrid, plug-in, battery electric, and fuel cell) in the coming years