Accounting

Porsche Automobil Holding SE”:

Founded in 2007, Porsche Automobil Holding SE (henceforth Porsche SE) is a large holding company that specializes in automobiles (Porsche Automobile Holding SE, 2021a). Besides having a majority stake in the Volkswagen Group and a 100% stake in Porsche Beteiligung (which is its only wholly-owned subsidiary), Porsche SE’s investment portfolio also includes several world-renowned European brands including Ducati, Audi, SEAT, Lamborghini, Bentley and Skoda (Porsche Automobile Holding SE, 2020; 2021b). For several years now, the company has been pursuing a diversification strategy in an effort to seize new opportunities whilst modernizing its product portfolio (Porsche Automobile Holding SE, 2020; 2021b). As of 2021, Porsche SE owns a 100% stake in V Planung Transport Verkehr AG, a technology company that specializes in transport logistics, and minority stakes in several U.S. and Israeli technology companies – AEVA, Markforged and Aurora Labs being the ones Porsche SE seems to be most optimistic about (Porsche Automobile Holding SE, 2020; 2021b).

Despite its efforts to diversify its investment portfolio, Porsche SE keeps regarding Volkswagen as its “core investment”, referring to itself as a “long-term anchor investor” (Porsche Automobile Holding SE, 2020). Being Volkswagen so important to Porsche SE’s overall strategy, in 2020, the company decided to acquire an additional 0.2% stake in the German automaker, voicing its support for its latest strategic initiatives (Porsche Automobile Holding SE, 2020). Porsche SE believes that Volkswagen’s growing interest in digital connectivity, artificial intelligence, autonomous driving technology and electro mobility is highly likely to pay off in the medium to long term as these technological trends are bound to redefine the automotive industry (Porsche Automobile Holding SE, 2020).

As a holding company, Porsche SE is not directly involved in the day-to-day operations of the companies that it oversees, as its sole purpose is to hold stock in other companies and manage its investment portfolio in such a way to create value for its shareholders. With that being said, Porsche SE monitors its investments very closely and receives regular updates from the companies that make up its holding structure (Porsche Automobile Holding SE, 2020). Besides evaluating management and financial reports, Porsche SE’s supervisory board also strives to ensure that the companies it is connected with avoid unnecessary risks, comply with all relevant laws and regulations and operate in a responsible manner – after all, if one of the companies in Porsche SE’s portfolio were to engage in illegal / illicit practices, the reputation and profitability of the group would be negatively affected (Porsche Automobile Holding SE, 2020). For example, when the Environmental Protection Agency found out that Volkswagen had equipped its diesel engines with devices to cheat emissions tests, the German automaker incurred considerable losses and experienced a major reputational crisis which had a negative impact on Porsche SE (Atiyeh, 2019; Porsche Automobile Holding SE, 2020). As Porsche SE’ latest annual report reveals, the group is still paying the price of that scandal as in 2020, the board had to include nearly €2 billion in the German automaker’s provisions for legal risks (Porsche Automobile Holding SE, 2020).

So, how did Porsche AG become Porsche SE? As the company reports on its official website, the decision to transform Porsche AG into a holding company primarily stemmed from a desire to switch to a more modern corporate structure that would allow for the implementation of a truly international strategy (Porsche Automobile Holding SE, 2021a). Given its substantial exposure to the automotive sector, Porsche SE is determined to support the automotive companies in its portfolio by making highly targeted investments across the entire automotive value chain, focusing especially on mobility- and vehicle-related solutions (Porsche Automobile Holding SE, 2021a). To fully appreciate the way in which Porsche SE operates, one should be familiar with the company’s internal structure. Porsche SE’s supervisory board consists of three committees, each with its own set of duties, goals and priorities: the executive committee deals with urgent business matters that require the approval of the supervisory board and performs a variety of HR functions (suggesting contract terminations or amendments, advising the board on compensation matters, reviewing the remuneration system etc.); the audit committee reviews both financial and non-financial exports, submitting its findings and recommendations to the supervisory board; finally, the nominations committee makes recommendations concerning the election of new board members  (Porsche Automobile Holding SE, 2020).

The COVID-19 pandemic has had a detrimental impact on Porsche SE’s financial position, causing its net income to fall significantly from 2019 to 2020; nevertheless, the group claims to be satisfied with its crisis mitigation efforts (Porsche Automobile Holding SE, 2020). As the table below shows, Porsche SE’s main strength lies in its strong investment portfolio, which comprises some of the world’s most notable automakers. By investing in automotive companies with very different strategies, products and target markets, Porsche SE has managed to minimize its susceptibility to adverse fluctuations in the global luxury cars market, thus gaining a considerable advantage over its competitors. Having operations in numerous countries across the globe, Porsche SE was able to mitigate the negative effects of the COVID-19 pandemic, as while Western Europe, Africa and South America recorded considerable losses, markets in the Middle East and Asia Pacific Region proved more resilient (Porsche Automobile Holding SE, 2020).  It is also worth pointing out that despite its natural attachment to Porsche AG, the group’s mission goes beyond the financial success of its main subsidiary. As a holding company, Porsche SE is ultimately committed to maximizing its shareholders’