Porsche EV roll-out delay deals US$6 billion hit to parent Volkswagen

A Porsche automobile on display at the Pittsburgh International Auto Show in Pittsburgh, Feb. 15, 2024. (AP Photo/Gene J. Puskar)

BERLIN/FRANKFURT — Porsche AG on Friday dialed back plans for its electric vehicle rollout due to weaker demand, pressure in key market China and higher U.S. tariffs, causing the luxury sportscar maker and its parent Volkswagen to slash their 2025 profit outlooks.

The move highlights the challenges for one of the most well-known car brands, which has been squeezed by its two most important markets - China and the United States - over price declines and trade barriers.

Volkswagen, Europe’s top carmaker, said it would take a 5.1 billion euro (US$6 billion) hit from the far-reaching product overhaul, which delays some EV models in favour of hybrids and combustion engine cars, at its 75.4 per cent-owned subsidiary.

The changes are a major shift for the Stuttgart-based maker of the iconic 911 model, and are expected to hit Porsche’s operating profit by up to 1.8 billion euros this year, it said.

Slower electric vehicle market launch

“We are seeing massive changes within the automotive environment,” Oliver Blume, CEO of both Porsche and Volkswagen, told analysts and journalists in a joint call, citing a clear drop in demand for exclusive EVs.

“We have made key strategic decisions. Now it’s time to put them into action. It’s going to be a tough and long road, and it will demand our full focus and strong effort.”

Porsche’s Frankfurt-listed shares were down 3.1 per cent at 1819 GMT, while Volkswagen’s shares were 2.1 per cent lower.

Porsche said it would delay the launch of certain all-electric vehicles, adding that the new SUV above the Cayenne model would initially not be offered as an all-electric vehicle, but with combustion-engine and hybrid models.

Profit margin outlooks cut

As a result, Porsche slashed its 2025 profit margin outlook to a maximum of 2 per cent from 5-7 per cent previously. It cut its midterm margin outlook to 15 per cent at best from 15-17 per cent.

“These are not margins that one would expect to see in a luxury product, at least not in a successful one,” UBS analyst Patrick Hummel said during the call.

Porsche will extend the production period of currently available vehicle models with internal combustion engines (ICE) and hybrid drivetrains, including the Panamera, into the 2030s, Blume said.

Blume said he was counting on more flexibility in the European Union regarding Brussels’ target of 100 per cent reduction of CO2 emissions for new cars and vans by 2035.

Holding firm Porsche SE PSH_p.DE, Volkswagen’s biggest shareholder, which also owns a 12.1 per cent stake in Porsche AG, also cut its outlook for profit after tax, while Volkswagen cut its profit margin outlook to 2-3 per cent from 4-5 per cent.

Us import tariffs not yet lower

Blume said a planned reduction of U.S. auto import tariffs to 15 per cent from currently 27.5 per cent could still take weeks as talks between Brussels and Washington over the issue are ongoing.

Volkswagen is in discussions with the U.S. administration over an investment package that Blume said could also cover Porsche, without being more specific.

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Reporting Christoph Steitz in Frankfurt and Thomas Seythal in Berlin; Additional reporting by Simon Ferdinand Eibach and Paolo Laudani in Gdansk; Editing by Jan Harvey and Richard Chang