HIGHWAY TO THE DANGERZONE

Lebanon 2013 | INDUSTRY | INTERVIEW

TBY talks to Assaad R. Raphael, Chairman & General Manager of Porsche Centre Lebanon, on the company's performance in the market, new products, and taxes imposed on luxury cars.

Assaad R. Raphael
BIOGRAPHY
After working for one year in the finance industry in Paris, Assaad R. Raphael returned to Lebanon in 1991 to work in petroleum products trading and helped establish a family business in the aviation sector. In 2002 he and his partners were allocated the exclusive rights to represent Porsche in Lebanon. In 2005 he became the majority shareholder of Porsche Centre Lebanon, and in 2008 the group was granted exclusive importation rights for the Porsche brand in Syria.

What have been Porsche's milestones over the past couple of years?

In the past two years, we have focused on growth. Porsche has new products coming, and it is no secret to anyone that we are expanding our product line; hence, we have decided to grow our facilities to better serve our clients. When the number of clients grows, you must expand your facilities and human capital; it is a natural investment. We have a showroom in downtown Beirut and on Corniche El Nahr. Given the economic growth of the Metn region and our need to reach out to our customers, we decided to open another branch outside of Beirut. Our objective is to create a Porsche hub for our clients and enthusiasts. I believe this is a big step for Porsche in Lebanon; our facility is now open and is experiencing huge success.

How many cars did you sell 2012, and what are you expecting for 2013?

In 2012, we delivered around 300 cars in Lebanon. Due to the high perception of the Lebanese consumer regarding sports cars, we have a high ratio of sports cars sold over four-door sedans, such as SUVs like the Cayenne or four-door Panamera. In the region, because the Lebanese consumer is very educated, aware, and trendy, our sales of sports cars are quite high. Moreover, I think Lebanon has a nice road network as well. Although it is not the nicest in the world, you can climb up the mountains on winding roads; you have uphill and downhill stretches, and you can visit beautiful villages where you can enjoy your car in safety.

In terms of the new product lines that you are introducing, what models are you expecting in the short term?

For the time being, we have the Panamera. It appeals to many customers that want a sporty car in a four-door sedan, while retaining a Porsche feel in the driving pleasure. We have the Cayenne, which is a very versatile SUVs, as well as the Carrera and all its variants, which range from the Carrera up to the 911 Turbo S. We have both the Cayman, which is a two-door, two-seater coupe, and the Boxster in both versions (Cayman and Cayman S, Boxster and Boxster S). The addition to this product line, as Porsche has already announced, is a smaller version of the SUV, which is due to be launched in early 2Q2014. It will be called the Macan, and is a four-door SUV that is a little bit smaller than the Cayenne. This car is perfect for the Lebanese consumer and the local road network. Being smaller than the Cayenne, it takes up less space and it is a sporty model, despite being an SUV. I think it will reach more clients. We are working toward its launch, and the car itself is wonderful. All we need is a little stability in Lebanon to be able to meet our sales targets.

“ We are bound to grow. The whole luxury industry around the world is booming. "

How are Lebanese consumers different from your other clients in the Middle East?

First of all, I have to say that the Lebanese client is very demanding. Lebanese clients are cultivated toward brands, and they know exactly what they want. When a client comes into the showroom, he knows what he wants and the options available. We find pleasure in configuring a car for a client who already knows what he wants. We closely discuss the specifications with the client to deliver the perfect product according to their wishes.

What is your view on the tax levels for luxury cars in Lebanon?

The cheapest place on the planet to buy a car is the GCC region. The custom duties are very convenient, at just 4%. There is barely anything to be paid in terms of taxes. On the other hand, in Lebanon, the tax structure is quite high. Around the year 2000, the government reduced it to 50% on high-end cars. As a result, the tax structure is as such: the buyer incurs 50% taxes, 10% VAT, and around another 6.5% for road tax and registration fees, which means that the price is not aligned with the GCC market. Because Lebanese people have businesses in GCC countries, and there is a lot of human talent in the GCC, they travel around Lebanon and every time they come here, they complain of how the prices in Dubai and Saudi Arabia are much cheaper. We hope that there will come a day when our taxes are aligned with the GCC. This would be an opportunity for us because it would definitely increase our sales.

Despite the high taxes, you are still selling and growing. What is driving this growth?

Today, the economy is stagnant, but we sell cars because we have excellent products in addition to the service we provide to our clients. In times of limited sales, the competition becomes tougher, and we need to keep our clients satisfied. In addition to this, a lot of our business revolves around Lebanese expatriates or those with businesses beyond the country who like to have a car in Lebanon.

What sales target are you aiming for in 2013?

I anticipate around 15% more sales than in 2012, and the introduction of new models will help achieve this. We also have the Turbo S and the 911GT3, which are arriving in October 2013, and the face-lifted Panamera launched in August. Because they are newly introduced models, there will be an appetite for them, and this will help us achieve our targets.

What is your outlook for the luxury car segment in the medium term?

We are bound to grow. The whole luxury industry around the world is booming, especially due to the growth of emerging markets like China and India. When you have notable demand, the manufacturers sell more, develop new products, and invest in R&D. And so they give us better products to sell. The problem is that, again, in our part of the world, the market is split between very low-end and very high-end products. This happens in countries that face economic instability. The trend is currently toward low-end models. That is why in Lebanon we see many cars being sold in that segment, and a lot of competition in terms of the financing and insurance of such models.

What role does pre-owned cars sales play in your operations?

The pre-owned cars sector is a very important business model. When we introduced pre-owned cars as a separate profit center in 2006, we thought that we needed to give the pre-owned customer the same experience that we give to a new car customer. We have created a showroom that is fully decorated as per Porsche CI, with specialized sellers, and we have introduced programs like extended warranties for pre-owned cars. Customers who want to buy a pre-owned car get the same experience as buying a new car, and enjoy the peace of mind of a warranty. For every two new cars we sell, we sell another 1.2 pre-owned vehicles. Because of the profile of our customers, they tend to take quite good care of their cars. When we give warranties, the car is almost brand new.