Porsche: A brief history
The founding and early life of Porsche
Hi.
Reading time: About 8 minutes
This week was a bit dry for me in terms of the things I learnt. But one of the interesting things I heard was the Acquired podcast on Porsche. It is one of the rare podcasts where they have uploaded video footage as well. This post is a huge thanks to them.
Time to dive deep into the history of Porsche.
Before we look into the Porsche we should know the situation of a country like Germany at the time that the company was founded.
Pre War
Before World War 2 Germany had the highest number of Nobel laureates. More than any other country in the world. A country like Germany housed a lot of geniuses ranging from Neils Bohr, Heisenberg, Albert Einstein, etc. It was not only science that the Germans were excellent at they were also amazing at manufacturing. This translated to automobiles as well.
There were a lot of smart people in the industry.
“The Benz Patent-Motorwagen ("patent motorcar"), built in 1885 by the German Karl Benz, is widely regarded as the first practical modern automobile[1][a] and was the first car put into production.”- Source
“The Benz Patent Motor Car – the world’s first automobile – was a sensation. Introduced in 1886 with an output of barely one horsepower, it changed human mobility forever. At the time, only true pioneers could contemplate the switch from four legs to three wheels”- Mercedes Benz website.
Around this time when the world’s first automobile is launched by Benz another person ‘Daimler’ sets up his own motor company. They released a model in the early 1900s named after the daughter of one of their dealers ‘Mercedes’. When the merger of Daimler and Benz happened the name Mercedes Benz came to be.
I was in shock when I got to know this is where the name came from.
So there was this very bright engineer known as Ferdinand Porsche who was regarded to be one of the best. Ferdinand was hired by Daimler Benz as a head engineer. He moved to the industrial town of Stuttgart with his family.
A very important and interesting thing to note here is the point that Ferdinand Porsche was a very huge Nazi. Not only was he a huge Nazi he was one of Adolf Hitler’s associates.
All the German car companies have had Jewish labour and most of them were arrested for war crimes post the war.
So Ferdinand worked for Daimler Benz for close to 2 decades. While he was there he came up with the idea of a small mass-market car. At the time all the cars being sold in Germany were meant for the rich. When he thought of this mass-market car only 2% of Germans were using cars. So there was huge untapped potential.
He goes with this idea to the board of Daimler Benz. They reject his idea saying cars are not meant for everyone. Due to this Ferdinand decides to leave Daimler and decides to start something on his own. This is the start of the friendly rivalry between Mercedes Benz and Porsche.
Ferdinand opens a new consulting firm. Where he consults German and American auto manufacturers on the engineering of their cars.
The name of this company was “Dr. Ing. h.c. F. Porsche GmbH, Konstruktionen und Beratung für Motoren und Fahrzeuge”
This is all his honorary accolades as the name of the company. And if you google the full form of the company you will find the first part of the name to be the full name of the company to this day.
To finance this company he takes the support of two individuals one of them is his son-in-law Anton Piëch and the other person is Adolf Rosenberger. It is said that Adolf Rosenberger was removed from their history because he was Jewish.
So one of the first projects the company had to work on was the project of making a small mass-market car for Volkswagen. Now another very interesting thing to note is the fact that Volkswagen was established by Adolf Hitler himself. It didn’t have a nazi connection, the company itself was Nazi.
So they get the project to design and engineer the Beetle as a car for the masses. And they could only produce about 200 before the war. They had to halt production during the war.
During the war
During the war, Ferdinand Porsche was actively engineering and designing tanks for the Nazis. It’s crazy how he engineered the beetle and a tank in this short period.
The Allied forces knew the places where the auto industries were operating and targeted them. Stuttgart’s factories were bombed. So for caution, Porsche took 20 odd of their brightest engineers and shifted them to a place in Austria and operated out of a sawmill. This was the start of their operations in Austria.
Post-war
Post the war when the Allied forces were deciding what they should do with Volkswagen the British initially had planned for the factory in Wolfsburg to be dismantled and moved to Britain. The British did not appreciate the car at all and thought it was irrelevant. Except for one person who saw the value of the beetle and the manufacturing facility. That one person was Major Ivan Hirst.
The Beetle is an iconic car. It is also the longest-standing single model production and the highest volume sold of the single model. The same model of the beetle which was sold in 1948 was also sold in 1998. So the same model was in production for around 50 years!
That is crazy.
After the war Ferdinand and Anton Piëch were sent to prison in France for war crimes for a few years. Even Ferdinand’s son was sent to prison for 6 months for war crimes. After his son Ferry Porsche came out of prison he had an idea as to what they should do next. He liked the idea of the beetle but noticed that it was not that enjoyable to drive as there was no speed to the car. It was slow. So he had customised his beetle with a better engine which made the car faster. He thought why not make a car which is small and fast?
At the time this was a big idea because the fast cars of that time were big. Nobody thought of a small and fast car. Even Ferrari at that time made cars that were fast but they were huge from the front. Like see the image below of the Ferrari 125 S the bonnet is so long.
Ferry Porsche had a team of engineers in Austria and they could work on this car so he decided to work with them and build their car in the Austrian village Gmünd. The car they made was the Porsche 356.
What a beautiful car. The German engineering of the time certainly came up with some of the best-looking cars.
After a few years, Ferdinand Porsche and Anton came out of prison and very soon their German operations restarted. Volkswagen which was now a government company offered Porsche a life-changing contract.
They got the exclusive right to distribute the Beetles across Europe as they had a good dealer network built in Austria.
They also got invited to restart their operations in Germany.
To do this they also got a royalty on every single Beetle sold.
This is a crazy good deal.
Volkswagen which even now is state-owned (20%) had just come out of a war. Why would this company led by the West give the deal of a lifetime to a Nazi?
Germany post-war was ground zero. The country needed a revival and even more so because there was a cold war coming and Germany was right next door. So to revive the country the West turned towards the industrialists. They knew that if they did not revive the economy it would turn out to be worse for them. So they did not care whether these people were Nazis.
Another very interesting thing was done by the government back then. It was regarding taxes.
So for normal individuals at that time the tax rate was very low it was around 10-20%.
But for industrialists, the tax rate was a whopping 95%.
This translated to corporations as well. It’s crazy how we cry for 30% tax whereas in Germany at that time these corporations were taxed at 95%.
Do you know what is even more crazy?
This ended up working brilliantly. The 95% tax rate incentivised these companies to reinvest any money that they made. This led a company like Porsche to invest all their royalty cash flow back into the business into their R&D or the production of their cars.
Porsche went on to produce some of the best cars which focused not only on the race track but also on the roads. So a Porsche could be raced in as well as driven to the office. That was and still is their uniqueness.
If you want to know about Porsche and its interesting stories I suggest you hear the entire podcast.
Thank you for reading,
Samvit.