Porsche has warned its profits will be hit this year as the sports-car maker ploughs €800 million into combustion engines and plug-in hybrid models, in the latest sign of waning demand for fully electric vehicles.
Shares in Porsche dropped 6 per cent on Friday after the carmaker said its profit margins were expected to be between 10 and 12 per cent this year, well below the group’s long-term target of 20 per cent.
The move to expand its range of combustion engine vehicles and hybrids, which some consumers are now opting for over fully electric models, will add another €800mn in costs this year, Porsche said.
In a further sign of the strains facing the group, Porsche SE, the Porsche-Piëch family’s holding company, said a previously announced writedown of its stake in Porsche would be between €2.5bn and €3.5bn, more than twice its prior estimate.
Porsche’s deliveries last year dropped 3 per cent compared with 2023, with its push into the fast-growing market for electric vehicles in China misfiring. The group’s Chinese sales slumped 28 per cent last year, with consumers failing to embrace its electric Taycan sedan.
The downgrade to its profit margins deepens the turbulence at Porsche, whose shares have struggled on the German stock market since it listed to great fanfare in 2022.
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Porsche said last weekend that it was in talks over ending the contracts of chief financial officer Lutz Meschke and Detlev von Platen, the group’s head of sales and marketing.
The discussions over the contracts are partly a response to concerns over Porsche’s approach to electric cars and sliding sales, according to people familiar with the matter.
However, it comes amid a power struggle between Meschke and chief executive Oliver Blume, who also leads Porsche’s parent company Volkswagen, the people said.
Porsche would not comment on the reason behind the unexpected move to restructure its management board.
Analysts at Deutsche Bank welcomed Porsche’s decision to increase combustion engine investments, despite it “costing more than expected”.
They also noted the company had previously hinted at plans to “right-size” its production capacity in response to lower demand for its cars.
“We highly appreciate that the company is willing to adapt to the new normal with ICE models playing a bigger role and volumes remaining depressed, especially in China,” the analysts added.
The Porsche-Piëch family, led by Wolfgang Porsche, who chairs the supervisory boards of Porsche AG and Porsche SE, the family’s holding company, has grown increasingly concerned about the simmering crises at both VW and the sports-car maker that bears its name. The family largely depends on dividends from the two companies.
Over the next few years, Porsche SE faces repayment on its debt partly built up from when it acquired just over 25 per cent of the ordinary shares in the sports-car maker in 2022.
As of December, the investment vehicle had a net debt position of €5.2bn. While only a small portion of the debt is due for repayment in 2025, the refinancing burden will rise sharply in the coming years, with more than €2bn in bonds and loans maturing by 2028.
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