Porsche subscription model is working and it’s attracting younger drivers, exec says

Key Points
  • Porsche Passport, the luxury car's subscription service, is attracting younger drivers to the company.
  • "We engage people with a brand that they usually wouldn't," says Klaus Zellmer, Porsche North America CEO.
  • The company has had eight years of consecutive growth and a market cap that is nearly 42 larger than last year.
Porsche CEO: We very much believe in fair, open trade
Porsche CEO: We very much believe in fair, open trade

Porsche Passport, the luxury car brand's subscription service that began in Atlanta last November, is attracting younger-than-expected drivers to the 87-year-old legacy company.

"We engage people with a brand that they usually wouldn't," Klaus Zellmer, CEO of Porsche North America, told CNBC's Phil LeBeau while in New York City for the 2018 New York International Auto Show.

"We're conquesting a target group, and engaging them with a brand, who do not want to commit to a three-year lease. They just want to go month by month and are willing to spend for that," Zellmer said.

Porsche Boxster S
Source: Porsche

Porsche Passport, which provides subscribers with access to Porsche vehicles via a mobile app, is currently only available in Atlanta, home to Porsche's North American operation, as well as Clutch Technologies, the company hosting the app.

The month-to-month subscription gives customers two price options: A flat fee of $2,000 or $3,000. The subscription includes a $500 activation fee and credit check, and covers vehicle tax and registration, insurance, unlimited mileage and maintenance. Smartphone users can download the app and begin using the same day or schedule future rides.

The program may be part of what's giving the company a boost in an otherwise grim industry. While U.S. new vehicle sales fell 2 percent in 2017, Porsche's sales in the U.S. had its eighth consecutive year of growth. The company's overall value increased nearly 42 percent, as market cap shot up to $24.457 billion this month, compared with $17.26 billion last March.

Zellmer said the growth can be attributed to many things, including tax reform and modern lifestyle habits.

Porsche Concept Study Mission E
Source: Porsche

"It's driven by the overall economy," he said, and called 2017 a "fantastic year" for Porsche, a unit of Volkswagen.

Meanwhile, competitors are struggling. Fiat Chrysler's sales fell 13 percent in January and another 1.4 percent in February. Ford's sales dropped 6.6 percent in January and 6.9 percent last month. And General Motors' sales were up 1 percent in January, but then fell 6.9 percent in February.

U.S. auto sales likely rose 0.4 percent in March, compared with the same time last year, J.D. Power and LMC Automotive said Wednesday. But the increase is most likely caused by increased consumer discounts, something analysts say is not sustainable. Sales are expected to drop even further for the remainder of 2018.

Zellmer said the majority of the subscription program's customers choose the more expensive tier, giving them access to 22 different models of high-performance sports cars and SUVs that can be "flipped whenever you want." And more than 50 percent of subscribers, he said, are new to Porsche.

A Porsche 911 GT3 at the new test track
Phil LeBeau | CNBC