Porsche AG has retreated from its ambitious electric vehicle expansion plans, citing weakened consumer demand, challenges in China, and elevated US tariffs, prompting both the luxury car manufacturer and its parent company Volkswagen to dramatically reduce their 2025 profit forecasts.
The strategic pivot underscores the mounting difficulties facing one of the automotive industry’s most prestigious marques, which finds itself caught between pricing pressures in China and trade restrictions in the United States—its two most crucial markets.
Volkswagen, Europe’s largest car manufacturer, announced it would absorb a R92 billion financial impact from the comprehensive product restructuring at its 75.4%-owned subsidiary. The overhaul prioritises hybrid and petrol-powered vehicles over certain electric models.
This represents a significant strategic reversal for the Stuttgart-based manufacturer of the legendary 911, with Porsche anticipating the changes will reduce operating profits by as much as R32.4 billion this year.
Electric Vehicle Programme Delayed
"The automotive landscape is undergoing profound transformation," said Oliver Blume, who serves as chief executive of both Porsche and Volkswagen, during a joint briefing with analysts and journalists. He pointed to a marked decline in appetite for premium electric vehicles.
"We have taken crucial strategic decisions and now must implement them. This will be a challenging and protracted journey requiring our complete attention and considerable effort."
Porsche’s Frankfurt-listed shares fell 3.1% by 1819 GMT, whilst Volkswagen’s stock declined 2.1%.
The company confirmed it would postpone the launch of several all-electric models. Notably, the new SUV positioned above the Cayenne will initially be offered exclusively with petrol and hybrid powertrains rather than as a fully electric vehicle.
Profit Margins Under Pressure
Consequently, Porsche has slashed its 2025 profit margin guidance to a maximum of 2%, down from the previously projected 5-7%. The company also reduced its medium-term margin outlook to a best-case scenario of 15%, compared to the earlier 15-17% range.
"These margins fall well short of what one would anticipate from a luxury brand, particularly a successful one," observed UBS analyst Patrick Hummel during the briefing.
Blume confirmed that production of current models featuring internal combustion engines and hybrid systems, including the Panamera, would continue well into the 2030s.
The chief executive expressed hope for greater flexibility from the European Union regarding Brussels' mandate for 100% CO2 emissions reduction for new cars and vans by 2035.
Porsche SE, the holding company and Volkswagen’s largest shareholder, which maintains a 12.1% stake in Porsche AG, has also revised downward its profit after tax projections. Volkswagen separately cut its profit margin forecast to 2-3% from 4-5%.
US Trade Relations Remain Uncertain
Regarding trade policy, Blume indicated that proposed reductions to US automotive import tariffs—from the current 27.5% to 15%—could still require several weeks as negotiations between Brussels and Washington continue.
Volkswagen is reportedly in discussions with the US administration regarding an investment package that could potentially encompass Porsche, though Blume declined to provide additional details.
Staff Writer
Reporting from the front lines of the automotive industry, delivering expert analysis and the technical updates that drive the South African motor sector forward.
