Porsche Trims Outlook Amidst Economic Pressures

FRANKFURT: Diminished profit margins in the first quarter have compelled Porsche to revise its financial projections for 2025. The luxury automaker cited a confluence of factors including a weakened Chinese market, elevated supply chain expenses, and the impact of US tariffs as reasons for the adjustment.

The imposition of US tariffs is anticipated to significantly increase vehicle costs, potentially leading to decreased consumer demand and hindering job creation within the automotive sector. This development adds to the challenges faced by an industry already navigating a complex transition to electric vehicles.

Porsche’s finance head, Jochen Breckner, indicated that the tariffs have already resulted in a substantial financial impact, estimating a loss of at least 100 million euros ($114 million) during April and May. He also noted that the company, which lacks domestic production facilities in the US, has not yet implemented any responsive measures.

However, Breckner suggested that this strategy might evolve pending further clarity regarding the final tariff rates. He stated, “We will undoubtedly need to adapt our market approach and transfer at least a portion of the tariff burden to our customers.”

Breckner also addressed the possibility of establishing local production in the United States, deeming it currently impractical due to Porsche’s relatively modest sales volume. He suggested that even a collaborative effort with another Volkswagen-owned brand would not justify such a move at this time. Following the announcement, Porsche shares experienced a 5% decline.

In anticipation of the tariffs, Porsche increased its shipments to the United States in April to build up inventory and maintain stable prices for orders placed in March.

The company acknowledged that the tariffs, which have been in effect since April at a rate of 25%, had a negative impact on its April and May performance. Porsche also cautioned that its updated financial outlook does not account for any future implications stemming from these tariffs.

China Sales Decline

Porsche has adjusted its revenue forecast for 2025 to a range of 37 billion to 38 billion euros ($42.17 billion to $43.31 billion), a decrease from the previous estimate of 39 billion to 40 billion euros.

The anticipated profit margin has also been lowered to 6.5-8.5%, down from the earlier projection of 10-12%.

Analysts surveyed by LSEG anticipate Porsche’s operating margin to be around 9.7% on revenues of 38.8 billion euros.

In the first quarter, Porsche’s operating margin fell to 8.6%, falling short of the analyst consensus of 9.8% from an LSEG poll.

Analysts at JP Morgan commented, “We think the company is strategically resetting expectations,” while expressing confidence that Porsche could regain double-digit margins by 2026.

Porsche, which had a higher market valuation than its parent company, Volkswagen AG, at its stock market launch in 2022, has since faced challenges, particularly with weak sales in China, its primary market. First-quarter sales in China plummeted by 42%.

Bill Russo, CEO of Automobility, a Shanghai-based consulting firm, observed that Chinese consumers purchasing electric vehicles are increasingly favoring domestic brands due to their advancements in technology.

He noted, “No international firm believed that the Chinese could somehow establish brand equity exceeding that of foreign brands, especially European marques.”

Porsche has also decided to discontinue its plans to expand high-performance battery production at its Cellforce subsidiary, citing reduced demand for all-electric luxury cars in China.