Porsche Executive Director Lutz Meschke: We are in contact with Chinese suppliers in the fields of batteries, ADAS, etc. | Exclusive Interview by 36Kr.

"Regarding eFuels synthetic fuel, we currently have no investment plans in China", "But I am in contact with Chinese suppliers in the directions of batteries, ADAS, connectivity, and entertainment systems, hoping to establish new cooperation", Porsche's Executive Director for Purchasing, Michael Macht, disclosed to 36Kr.

Under the goal of banning the sale of new fossil fuel vehicles by 2035, the European Union has left a compromise solution for fuel vehicle manufacturers: Fuel vehicles that use eFuels synthetic fuel exclusively can still be registered. As a leader in the era of internal combustion engines, Porsche has formulated a dual-e strategy and decisively bet on eFuels synthetic fuel.

eFuels is a synthetic methanol, a liquid fuel synthesized from water, hydrogen, and carbon dioxide, which can be mixed with gasoline and diesel and injected into fuel vehicles to drive the engine. Porsche claims that eFuels has a convenient energy replenishment method and can separately provide a mixture containing eFuels at existing gas stations.

However, the synthetic fuel supplier HIF, which cooperates with Porsche, currently has an annual output of only 130,000 liters, with a cost of up to $10 per liter, much higher than the cost of fossil fuels and electricity, making the promotion of eFuels extremely difficult.

Currently, among the models on sale globally, only the Bentley Continental GT Speed Edition can use eFuels synthetic fuel. This luxury model with a starting price of 3.312 million yuan does not have sufficient sales to achieve a scale effect.

In the Chinese market where the penetration rate of new energy vehicles is gradually increasing, Porsche's dual-e strategy has obviously tilted towards electric vehicles.

Recently, during Porsche Executive Director Michael Macht's visit to China, he had an exchange with 36Kr and other media regarding Porsche's dual-e strategy. As the main person in charge of eFuels in the dual-e strategy, she detailed Porsche's current electrification strategy.

The dual-e strategy is Porsche's new electrification strategy proposed in 2022. The specific meanings of the two Es are eMobility for electric mobility and eFuels for synthetic fuel. Porsche's goal for eMobility is to achieve that pure electric models account for 80% of new car sales by 2030. For eFuels, Porsche's commercialization process is not so aggressive, but its annual production of eFuels is gradually increasing.

Michael Macht told 36Kr that the logic behind Porsche's electrification is to achieve environmental protection goals. Pure electric vehicles are indeed the best solution, but the prerequisite is that the electricity comes from renewable energy sources. But the reality is that we still rely on coal-fired power generation. To reduce carbon emissions, eFuels synthetic fuel is a very effective approach.

eFuels synthetic fuel is a liquid hydrocarbon chain fuel, with a form no different from common gasoline. Its production process is to electrolyze water with renewable electricity to complete the preparation of green hydrogen, and then synthesize the carbon dioxide captured from the air and green hydrogen through a catalytic reaction. eFuels can replace gasoline or diesel to drive a car engine.

Michael Macht believes that the promotion of electric vehicles takes time. When charging facilities are not yet widespread, eFuels synthetic fuel is a very suitable energy choice. Currently, the synthetic fuel supplier HIF, which cooperates with Porsche, has an annual output of 130,000 liters at its factory in Chile.

According to public information, the cost of eFuels synthetic fuel is about $10 per liter, and with the expansion of scale, it can reach a minimum of $2 per liter. In some countries, such a price is still higher than that of fossil fuels, and the promotion difficulty is not small. Currently, the promotion of eFuels still needs to be based on subsidies. Michael Macht said that Porsche currently has no eFuels-related investment plans in the Chinese region.

But Michael Macht revealed another important move of Porsche in the Chinese region. She will visit several Chinese suppliers, covering several major directions such as batteries, ADAS, connectivity, and entertainment systems.

Compared to eFuels, this is obviously the direction that Porsche is more eager to implement at present. In the first three quarters of this year, Porsche's cumulative sales in the Chinese market were 43,280 vehicles, a year-on-year decline of 29%. China has slipped from Porsche's largest single market globally to the third largest market.

The fierce competition in the Chinese automotive market has forced Porsche to improve the product competitiveness of its electric vehicles. Battery life, intelligent driving, and intelligent cockpits are the core concerns of Porsche.

The visit of the global purchasing director undoubtedly shows Porsche's emphasis on the Chinese market and supply chain. How quickly Porsche will promote the application of batteries and intelligent technologies will directly affect the future fate of Porsche's electric vehicles.

Porsche Executive Board Member Michael Macht

The following is the interview transcript between 36Kr and other media and Michael Macht, with slight adaptations without changing the original meaning:

Media: What is the original intention of Porsche to develop eFuels fuel?

Michael Macht: We develop eFuels in the hope of producing a sustainable green fuel to reduce the impact of carbon dioxide emissions on the environment. We have established a cooperative relationship with a synthetic fuel supplier, HIF. Since 2022, we have successfully mass-produced eFuels at the pilot plant in southern Chile. To date, Porsche is the only brand that can mass-produce this sustainable fuel.

Media: What are Porsche's plans for the global layout next? What do you think is the biggest challenge you will face next?

Michael Macht: In the past three years, the COVID-19 pandemic, the shortage of semiconductor supply, and a series of international political events have all brought challenges to our supply chain. My team and I have been working hard to overcome them and find solutions. One of the challenges for Porsche next is the transformation of the supply chain.

As a sports car brand with a 76-year history, Porsche has been focusing on two power forms, internal combustion engines and plug-in hybrids, before the Taycan was launched. Previously, the suppliers mainly focused on engine components, emission components, and fuel tanks.

However, as we move towards electrification, some traditional parts are no longer necessary. Now, what we need to purchase are batteries, electronic components, software, etc. This means that we need to gradually shift from relying on the traditional supply chain to establishing partnerships with new technology suppliers, which is a difficult task for me at present.

For a long time in the past, we mainly cooperated with traditional automotive suppliers who are well aware of the rules of the automotive industry. But with the emergence of new technologies, new partners have entered the automotive supply chain field, and they need to have an in-depth understanding of the situation in this industry. For example, safety is crucial to the automotive industry.

Some suppliers have been active in the consumer goods industry, such as the mobile phone industry, where the requirements are completely different from those in the automotive industry. Now, they must understand that the failure of technology may directly threaten the life safety of customers. Therefore, we need to spend a lot of time and energy to help them understand this. Both sides work together to meet our consistent high-quality standards, which will also be one of the challenges I will continue to face in the future.    

Media: What are the costs of Porsche's research and development and production of eFuels? How about the usage cost for consumers? Does this have a good business prospect and is it a high-return investment?

Michael Macht: First of all, I need to clarify that Porsche itself does not produce this fuel. Our partner HIF is the actual producer of eFuels, and we are a shareholder of this company. Currently, the annual output of our factory in Chile is 130,000 liters. Although this number is not huge, we have mastered this technology, and the cost will gradually decrease in the future as the production scale increases.

If the production of traditional fuel is restricted and enterprises that produce neutral fuels like ours are rewarded, in the long run, the costs of the two will become increasingly closer.

Media: Does Porsche have eFuels-related investment plans in China?

Michael Macht: Currently, we do not have relevant investment plans in China. However, Porsche has always maintained an open attitude and will conduct a detailed evaluation and consideration of any potential development opportunities.

I understand that some electric vehicles in China will be equipped with a lightweight battery to improve their cruising range, and at the same time, a small internal combustion engine will be installed to extend the driving mileage. Through this combination of battery and fuel, a truly long-distance driving can be achieved.

eFuels provides a good solution for such models, especially when the charging facilities are not yet fully popularized. It is also a very sustainable energy choice.

Media: The current energy supply tends to be pure electric vehicles or hybrid vehicles. People clearly know that it is feasible to achieve environmental protection goals by approaching the first performance principle. You just said that the use of eFuels does not require modifications in infrastructure, but how to make users more clearly understand the technical logic of eFuels?

Michael Macht: Everything we do is to achieve the ultimate goal of environmental protection. Pure electric vehicles are indeed the best solution. But there is a prerequisite that the electricity comes from renewable energy sources. However, the reality is that many regions around the world still rely on coal-fired power generation. Therefore, strictly speaking, pure electric vehicles cannot be completely regarded as the best way to reduce carbon emissions.

It is also considering this point that we started to research and develop eFuels. Currently, there are more than 1.3 billion internal combustion engine vehicles on the road globally, and it is impossible to fully electrify them overnight. Therefore, for those internal combustion engine vehicle owners, eFuels is undoubtedly an excellent choice to achieve the goal of decarbonization.

Media: eFuels is environmentally friendly and sustainable, and environmental sustainability is a core issue that all European automakers will face. Will eFuels become a key strategy for Porsche in the future like pure electric vehicles? What is Porsche's long-term plan for environmental sustainability? Has it changed compared to before?

Michael Macht: Porsche is committed to the "dual-e strategy", namely electric mobility and eFuels.

In terms of electrification, we have been continuously investing, which is the current mainstream. But as I just said, for those fuel vehicles still on the road and in countries where the charging network is still not perfect, eFuels is a very good sustainable solution.

As far as I know, China has clearly stated in its recent five-year plan that it will vigorously develop non-fossil energy. Therefore, this technology can not only be applied in the automotive and aviation fields but also help solve China's energy problems.

Media: Brands such as Mercedes-Benz and BMW in German automakers have been vigorously developing their local supply chain networks in China in recent years. How does Porsche view the increasingly developing Chinese automotive supply chain? Are you in contact or do you plan to use suppliers from China?

Michael Macht: Although we currently have no production plans in China, we already have many Chinese suppliers because we know that China's technology is globally leading, and we have a strong willingness to bring more Chinese technology to our models. This time, I and my team came to China to meet with different Chinese suppliers, hoping to establish new strategic cooperation with them.

Media: Can you disclose what directions this round of contacts mainly focuses on? For example, intelligent driving and cockpits that Chinese automakers attach great importance to? Or the traditional chassis and engine fields?

Michael Macht: What can be disclosed to you at present is: batteries, ADAS, connectivity, and entertainment systems.