Porsche‘s strategy to have all its models fully electrified, apart from the 911, shown, contributed to the automaker's problems.
Porsche is battling a mounting crisis as sales in China collapse, sales in the U.S. are impacted by higher tariffs and its electrification strategy falters.
Porsche has also delayed the introduction of the electric 718 Boxster and Cayman and a new three-row flagship SUV, according to Automotive News Europe sister publication Automobilwoche.
The automaker has cut its full-year sales revenue forecast to €37 billion to €38 billion, down from €39 billion to €40 billion previously, citing U.S. tariffs and low demand in China for its BEVs.
Porsche will likely further adjust its forecast downward this year, unless the U.S.-EU trade dispute is resolved, Michael Punzet, analyst at DZ Bank said in an investment note.
Porsche expects a dip in U.S. sales after consumers pulled forward purchases earlier this year to beat tariffs, procurement chief Barbara Frenkel said on May 13 at a conference organized by the Financial Times in London.
Why Porsche is in trouble
How have things gone so wrong for one of the world’s most profitable premium brands?
According to Fabio Hölscher, analyst at Warburg Research, Porsche‘s initial strategy to have all its models fully electrified, apart from the 911, is at the root cause of the problem.
“Porsche‘s original model portfolio plans are what currently amplifies these market-driven setbacks,” Hölscher said in an emailed reply to questions. “Because the battery electric adoption is behind schedule, Porsche now has to develop additional combustion models on top of dealing with the costly delays in BEV ramp-up, as well as managing the weak situation in China and uncertainty around U.S. exports.”
He added that to transition to electric Porsche would have benefited from adopting “a more flexible production approach between combustion and BEV cars, like BMW did.”
Porsche did not reply to an emailed request for a comment.
China’s sleek, sporty models challenge Porsche
Fierce competition in China is hitting Porsche hard. The automaker’s first-quarter sales in China were down 42 percent compared with the year-earlier period. The high-end sports car maker attributed this to the “very challenging market conditions, especially in the luxury segment, and the high level of competition in the Chinese market.”
This is in sharp contrast to 2021, when Porsche‘s sales in China peaked at 95,671 cars and China was Porsche‘s largest-single market for the seventh consecutive year.
“For Porsche and all German automakers, the biggest problem is China,” Gartner Vice President of Research Pedro Pacheco told Automotive News Europe. “For several decades, China was the gift that kept on giving. Porsche built a great market presence in China – a market with tremendous growth and opportunity.”
Now, Chinese startups are moving into Porsche‘s domain, introducing sleek, sporty challengers that are technically advanced yet affordable. While the Chinese alternatives might not be as high performing as Porsche‘s cars, they attract consumers by offering value for money.
“Ultimately, this changes the goalposts for Chinese consumers,” Pacheco said.
He said what Porsche offers in terms of performance and software-related features needs to be worth it in the customers’ eyes.
“Porsche will not like to sell their cars at a discount so the only other option is to raise the bar in what they deliver in terms of product,” Pacheco said.
Warburg Research’s Hölscher believes Porsche should sit out the storm.
“We think some effects are temporary and need to be endured as cost sensibly as possible,” he said. “Softer overall demand, (for luxury cars especially) will likely recover at some point. ‘Cheaper’ Chinese/local alternatives might also become more expensive down the line and lose some of their competitive edge versus foreign manufacturers.”
In the midterm, new Porsche models with technology and features more catered to the Chinese market should also help Porsche regain market share, Hölscher added.
Nevertheless, China, because of its size and what it represents in terms of potential for growth remains crucial to Porsche‘s future, Pacheco concluded.
U.S. tariffs, in place since April at 25 percent, are expected to raise car prices by thousands of dollars, adding to Porsche‘s woes because it imports all its vehicle from Europe.
Going forward, it is unlikely that Porsche would set up a U.S. manufacturing base as this would require a lot of capital and time, Hölscher said.
Instead, Porsche could benefit by working together in the U.S. with VW Group, Pacheco pointed out.
Battery supply snags weigh on Porsche
Porsche is also being weighed down by battery supply issues.
In June 2021, it set up Cellforce to develop and produce its own innovative high-performance cells. “This positions us at the forefront of the global competition for the most powerful battery cell,” Porsche CEO Oliver Blume said at the time.
Now, Porsche no longer plans to expand high-performance battery production at Cellforce, citing falling demand in China when presenting its quarterly figures at the end of April.
“The project is not economically sustainable in the short-term given the slower adoption of fully electric vehicles compared to initial expectations,” Hölscher said. “At the same time, other battery players are competitive. Thus, it makes sense to continue using the scale effects of other suppliers like CATL until the adoption of fully electric cars stabilizes.”
Moreover, it seems unlikely that an investor for Cellforce will be found in the short term, he added.
Porsche is looking to new managers to steer it out of a crisis.
Effective July 1, Michael Steiner will take on the role of deputy chairman of the executive board, the No. 2 position at Porsche, quitting his wider role as VW Group’s head of development. In addition, Joachim Scharnagl will succeed Barbara Frenkel as head of procurement in August.
Starting Aug. 19, Vera Schalwig will take responsibility for the human resources and social affairs division, succeeding Andreas Haffner.
The personnel changes “underscore the severity of the situation and show that the organization is being recalibrated to better fit current market trends,” Hölscher said.
Automobilwoche and Reuters contributed to this report.
