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HomeFinanceWhy Porsche is investing $100 million on eFuels

Why Porsche is investing $100 million on eFuels

Porsche’s bestselling cars today are SUVs, a far cry from what the luxury brand built its reputation on — small, nimble and, above all, unique rear-engine sports cars like the 911.

Now the famous German automaker is faced with the challenge of how to maintain a connection to its illustrious heritage, and its distinct brand identity, in the EV era. The answer might be something called eFuel — or fuel made in a factory partly from carbon pulled from the atmosphere.

Porsche has invested more than $100 million in the development of eFuels. The company argues that fully converting its 1.4 billion-vehicle global fleet to electric vehicles will take too long to meet climate change mitigation goals, so it has decided to go this new route.

Panamera eFuels experience in Patagonia, Chile

Courtesy: Porsche

In late March, the European Commission, the executive body of the European Union, included an exception for eFuels in a proposed ban on internal combustion engines set to take effect in 2035. 

“With this approach we have another lever, another opportunity to reduce the CO2 footprint for the combustion engine-driven cars,” said Karl Dums, senior manager of eFuels at Porsche. Before he joined the project, Dums was one of the engineers who worked on the Taycan, automaker’s first EV.

The Taycan, which was launched in 2019, has been a double-barreled success. It accounts for 11% of Porsche’s total sales and makes a profit, which is a rare feat for an electric vehicle.

Panamera eFuels experience in Patagonia, Chile

Courtesy: Porsche

“Electric cars are more expensive to produce, so they are margin dilutive,” said Daniel Schwarz, managing director at Stifel. “And Porsche managed to increase the share of electric cars and increase the profitability in parallel.”

Porsche plans to electrify 80% of its lineup, but some iconic models — especially the 911 — may never make the transition.

“It’s really brand defining and an iconic product,” Schwarz said of the 911. “And due to its architecture, the engine and most of the weight being on the rear axle, it’s not easy to electrify if you want to keep the driving characteristics unchanged.”

Porsche also believes a large share, roughly 70%, of all its vehicles ever made are still on the road. The brand also is a favorite among collectors. Industry analysts say its heritage, embodied in these older cars, is part of what gives Porsche its status and mystique, and, what’s more, helps to carry the brand’s reputation on to the next generation of car lovers.

But critics of Porsche’s $100 million push into eFuels argue the resultant fuel will be too expensive and inefficient to ever compete with electrification. 

Panamera eFuels experience in Patagonia, Chile

Courtesy: Porsche

“I honestly don’t understand why some of these automakers are interested in eFuels, because it just doesn’t make sense from a cost perspective,” said Stephanie Searle, director for the fuels program and the U.S. region at the International Council on Clean Transportation. The group is a nonprofit that researches technologies used for carbon reduction.

The ICCT expects EV costs to continue to decline rapidly, and reach purchase cost parity with gasoline cars and SUVs somewhere between 2025 and 2030, depending on the vehicle.

“EFuels only make internal combustion engine vehicles more expensive,” Searle said. “We’re finding that if we produce them today, it would cost something like $10 a gallon at the pump for consumers.”

But Porsche says costs can be brought down to a level acceptable to at least that portion of customers who are willing to pay more money to keep classic vehicles and high-end sports cars on the road for years more to come.

Watch the video to learn more.

This story originally appeared on CNBC

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