Skoda is absolutely crushing it out there in Europe and Asia — the Czech carmaker just had the best second quarter in its entire history and left the much more upmarket Porsche in the dust. Skoda scored $869 million in operating profit, or a 9.5% operating return on sales. Typically, you'd expect to see margins that good on premium badges, which can sell for a higher price over production cost just because the buyer wants bragging rights. Skoda's doing it just by, you know, running the business efficiently
and making solid products. What an idea!
Skoda's richer, cooler cousin in the Volkswagen Group family, Porsche, has fallen on harder times. Despite having its best first-half in America ever, globally the Stuttgart legend is down 6% year over year. Bloomberg reports that translates to an operating profit of $181 million, just 21% of what little Skoda managed. Most of the hurt is coming from China, where sales plummeted 28% in the first six months of the year, a combination of tariff chaos and increasingly competitive Chinese cars. Even in the U.S., tariffs are weighing the company down, something that appears like it will get worse before it gets better.
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Playing To The Home Crowd
As Porsche CEO Blume put it, "Our business model... no longer works in its current form." That sounds like a much bigger problem than one bad cycle. By contrast, Skoda is far less reliant on the Chinese market and isn't even in America, concentrating most of its efforts in Europe. Turns out, hyperfocusing on one region, its regulatory framework, and its consumers' preferences pays dividends. To that end, fellow Volkswagen cousin Cupra is also seeing huge gains right now by focusing on Europe, including a 33% sales spike just in the first half of this year, per Bloomberg.
Basically, in a world of increasing trade wars and protectionist policies, it's only going to get harder and harder to operate as a global brand. Maybe new business models will be able to navigate these new waters, but right now, regional brands are having a moment.
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