Porsche has also announced that it will be cutting almost 4,000 jobs as part of a wider reorganising effort, as the company attempts to become more efficient in the medium and long term.
ADVERTISEMENTGerman car giant Porsche’s shares plunged 4.9% in Frankfurt on Wednesday afternoon after the company issued its second profit warning in as many months, highlighting the likely negative impacts of falling sales and rising costs.
Porsche announced group sales revenue of €40.1 billion for 2024, down 1% on the previous year, although it said more competitive pricing and customisation options helped limit losses to an extent.
Group operating profit was €5.6bn last year, down from €7.3bn in 2023, with operating return on sales falling from 18% to 14.1%, a reflection of narrowing profit margins.
Back in February, the company revealed that it would be investing €800 million in new hybrid and internal combustion engine models, a move which is expected to hit profits this year.
Porsche confirmed it plans to cut about 1,900 jobs by 2029, in addition to 2,000 job losses expected immediately as fixed-term employment contracts expire, with employees encouraged to accept severance packages or take early retirement.
“The whole industry was already in a difficult place as it dealt with a mismatch between regulation around the transition to electric vehicles and uneven demand for EVs among consumers, as well as mounting competition from China and weak consumer sentiment,” said Russ Mould, investment director at AJ Bell.
“At Porsche, this has been compounded by supply chain issues and delays in the roll-out of new models,” Bell added. “Now tariffs have been added to the mix, it looks even harder for Porsche to arrive at its goal of a 20% margin.”
Mould also highlighted that although focusing on streamlining the company and replacing key executives could prove to be good steps for Porsche, these are unlikely to help the company much in the short term.
The Volkswagen subsidiary is targeting a return on sales of over 20% in the long term, but medium-term expectations are for 15% to 17% amid the challenging business environment.
Euronews has contacted Porsche for further comment.
Weaker demand from China continues to batter Porsche
Porsche, along with other luxury German car companies such as Audi and Mercedes-Benz, is feeling the effects of falling demand in China, where rising living costs of living mean consumers are reluctant to splash out on luxury goods.
The company is also facing rising competition in its home market from Chinese electric vehicle (EV) manufacturers such as BYD, Geely and SAIC, who have increased their European market share by offering cheaper products with more modern designs and more features.
Lower demand for electric vehicles across Europe has also impacted Porsche, as relatively high interest rates and inflation continue to weigh on consumer wallets and sentiment. This trend has impacted other major EV producers such as Tesla as well, which has also been hit by rising Chinese competition and has seen 40% of its market value wiped off so far this year.
Buyers have also increasingly shunned Tesla amid growing discontent over Elon Musk’s increasing involvement in US politics, as well as his vocal support for far-right figures in Europe.
