Future-Proofing Your Business

Mercedes have a channel designed for owners of their older cars. Now Porsche is following suit.

Ripe for restoration: 944gts.com
Ripe for restoration: 944gts.com

But Bristol were there long before, since most of their business revolved around re-selling their cars and keeping them on the road. In the case of Mercedes and Porsche the turn-over will be rather bigger than Bristol’s cottage industry. Is this the start of a trend?

Porsche have opened a centre in Gelderland, Holland to cater for the sales, service and restoration of their discontinued models. This is what they are offering (caution: chunk of cut-and-pasted text): “More than 70 per cent of the vehicles ever produced by Porsche are still running today. To ensure that these classic cars receive optimum support and overhaul facilities, Porsche is establishing an international dealer and service network with some 100 centres to reach completion by 2018. This mainly involves Porsche centres which will provide support for sports cars of earlier eras in addition to the current models and will be certified as Porsche Classic Partners.

Porsche customers and potential customers can expect the complete range of Porsche Classic services from the Partners. These services will not only include the supply of some 52,000 original spare parts, complete and partial overhauls but also repair and maintenance work and the sale of classic cars. The Porsche Classic Partners will be setting up a separate area for this purpose with classic vehicles on display and current spare parts together with technical literature and information.”

Let’s say the future for new cars doesn’t look as rosy as it once might. Maybe there is money to be made in not only selling new cars but keeping them running indefinitely. And whereas at one time manufacturers were content to let others supply accessories, now this business in firmly under the show-room roof. Why else are roof-rails now so model specific?

One way to view this step by Mercedes and now Porsche is that with vehicles so long-lived, there is in fact a good revenue stream to be had by muscling in on the business of maintenance and restoration of the entire back-catalogue of their cars. As Porsche note, nearly all the cars they’ve ever made are still around. Sure, a lot were made in the last 20 years but there is a substantial number of cars owned by affluent people who would rather entrust their car to the people who made it than many of the other small firms trying to trade in vehicle maintenance services.

Such revenue as can be captured has two beneficial effects. One is simply to make money. The second is to keep those old cars on the road as rolling adverts for the newer ones. As I have said before, every W-123 Mercedes that you see in daily use is a testament to the quality MB would like you to think the new cars have. Porsche can make the same claim.

So, how far can this model go? Well, the premium manufacturers are in with a good chance to try extending the reach of their dealer network. That would be Jaguar, Ferrari, and Lamborghini. I have a feeling BMW might not have the long-term cachet to justify such an enterprise. Maserati’s governance has been too shaky to ensure the existence of the plans and tools. Ditto for Alfa Romeo. Other manufacturers with a bit of intelligence might want to explore this option even if they don’t trade in longevity: Ford and Opel/Vauxhall have a large fan-base of owners who would probably very much like to have official support for their Granadas, Escorts, Senators and Kadetts. I don’t see Fiat, Peugeot, Citroen or Mazda heading down this path.

21 years old but is there money in this for Renault? danielcurnock.co.uk
21 years old but is there money in this for Renault? danielcurnock.co.uk

Another way to consider the business is to think that perhaps in future money will be made maintaining cars, even past the first lease or the initial warranty because there are fewer new ones being sold. The car might become a long-term durable like a house that is updated and renewed rather than like a washing machine to be thrown away. For Porsche the move is rather obvious given that people view their cars as durable goods and not disposables. The customer-base is rich and willing to pay for spares. The next thing is to see which maker goes down the path of reclaiming their brand’s heritage instead of turning their backs on it.

Author: richard herriott

I like anchovies. I dislike post-war town planning.

10 thoughts on “Future-Proofing Your Business”

  1. It certainly makes sense for Porsche to join Mercedes Benz Classic Centre and Ferrari Classiche in profiting from their own heritage. I imagine Mercedes and Porsche’s tasks are more straightforward than Ferrari’s, where even post Fiat era cars were made to ‘artisan’ tolerances. Jaguar are recreating a limited batch of lightweight E Types, but you can’t help but think that they missed out on recreating a bunch of Mark 2s and the like over the past 20 or more years. As for a recreated Opel Senator – sounds fine to me.

    1. Klassische Audi? It is revealing that the idea doesn’t have a convincing ring. Klassische Citroen might work for selected models. The re-imagined Ford Granada? There aren’t enough of them left, I think.

    2. Audi is most obviously desperate to enter the league of Purveyors of Great Classic Cars, just as it has joined the premium ranks 15 years ago. They are so desperate, in fact, that the Audi Tradition stand at any classic car show of one’s choosing must ideally match Mercedes’, or at least BMW Mobile Tradition’s representations in terms of size. Which appears almost comical, considering Audi’s awful reputation, as far as supply of old models’ parts is concerned. Yet maybe there’s a plan behind this glaring inconsistency: with its maintenance costs reaching Rolls-Royce levels, Audi’s V8 saloon could, at least in this regard, be considered a truly exclusive classic car.

    3. I’m sure one of you out there dreams of getting a decent Ur-S6 Avant and having it restored by Audi Tradition. It just happens that I have a perfect base car that I’d be willing to part with for the right price. Please form an orderly queue.

  2. I think the concept of major manufacturers profiting from the longevity of modern cars is interesting; after all if the car is still going to be on the road why not gain some marque loyalty, kudos and money by supporting it. We recently visited some friends in Washington DC who had a 5 series BMW and a Lexus 400. Both cars were over ten years old, both had done more than 100,000 miles and both showed minimal signs of age. Our friends were not car enthusiasts at all and when I asked them how they kept the cars so well they seemed perplexed. “We just get them serviced regularly at the local BMW/Lexus dealer”. I found this provided a more positive impression than seeing the latest model with blinged up wheels and deeply tinted glass.

    The problems with the concept probably arise when service costs are disproportionate to the value of the car.

    1. About the last point- you can judge a cost relative to the expected sale price of the car or compared to the cost of a replacement. Insurance company thinking has crept in to people’s own habits of reasoning so they reason that if the repair is, say, 1000 and the car worth 1000 then they give up and might go and spend five times or more on a replacement. I’d say the best measure is if you can afford the repair then do it, regardless of the notional value of the car. For the cars Porsche and Mercedes are catering to with the classic service, the vehicles’ values are now past the rock-bottom stage. For a commodity car like a ’97 Corolla this sort of thing isn’t going to apply. Perhaps it should. Scrapping an otherwise working car because one component has failed is a waste.

  3. Jaguar Land Rover are piling into this market too. A lot of it is fueled by the surging prices for older cars, of course – prices for original Range Rovers, for example, are notably stronger over the past year.

    I don’t like the classic car market being dominated by speculators, but scrapping cars just because they are a bit elderly is worse.

    1. JLR would be mad not to cash in. Proportionally, Jaguar is a much bigger force in the classic market than in the one catering to new car owners. In fact, they’re very much what Audi would like to be in this field and should therefore try their damnest to exploit this field, which they are now apparently ramping up to do. They’d be fools not to.

  4. I suppose manufacturers decide to enter this market for two reasons. One is that it can be profitable. Second that it shows that they respect their own history. But in the case of Porsche, Mercedes and Ferrari, it certainly isn’t because they are responding to a service that was hitherto unavailable. There is a wealth of long-established, highly skilled, specialist restorers for all these marques and, whereas I’m sure that the manufacturer’s heritage facilities will do a fine job, I imagine that same job could be done by independent specialists just as well and for less money. But just as some people will only ever buy a genuine Apple cable for their iPhone, so will some people only feel happy with a factory restoration.

    1. It might be possible that some established mechanics will know more about defunct Jaguars than Jaguars own staff do. I expect that to run such a business in-house they will be placing ads in trade papers for people who actually have spent three decades fixing S-types, Mk10s and whatever the heck it was that Morse drove. That means customers will indeed be paying more for the same sort of service provided by a Jaguar specialist or “resto” specialist.

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