Porsche AG’s shares fell 7% on Friday, marking the biggest drop among European companies and its worst trading day since going public. The sharp decline followed a warning from the luxury carmaker that rising costs for new model launches and battery-related expenses would significantly impact its 2025 profits.
The company revealed that it expects a profit margin of 10-12% this year, well below analysts’ expectations of 14.8% and far from its mid-term target of 17-19%. The announcement, made late Thursday, came as a shock to investors and raised concerns about Porsche’s financial outlook.
To support the launch of new combustion engine and plug-in hybrid models, Porsche said it would take an 800-million-euro ($832 million) hit to its profits. This shift aligns with an industry-wide trend, as automakers pivot back toward combustion engines due to slowing electric vehicle (EV) demand in Europe and increased competition from Chinese manufacturers.
Analysts at Deutsche Bank described this as a crucial moment for Porsche, stating that it is the company’s last opportunity to demonstrate it can turn around its business before losing further investor confidence. Porsche’s struggles have been evident since its stock market debut in 2022 when it was initially valued higher than its parent company, Volkswagen AG. However, weak EV sales and declining demand in China, Porsche’s largest market, have led to a dramatic drop in its share price.
In 2024 alone, Porsche’s shares declined by 27%, and its market capitalization has been halved since its May 2023 peak of nearly 110 billion euros. Analysts at Bernstein Research called the margin forecast a “major concern” and noted that investors would be expecting further clarification from Porsche’s management before the company releases its full-year results on March 12.
Amid ongoing financial difficulties, Porsche recently announced discussions to terminate the contracts of its chief financial officer and sales chief early, following criticism over the company’s performance and declining stock value.
Although 75% of Porsche’s share capital is owned by Volkswagen AG, just over 12.5% is controlled by Porsche SE, an investment firm run by the Piech and Porsche families. Porsche SE has warned that impairments on its stake in Porsche AG could reach 2.5 billion to 3.5 billion euros, nearly double its previous forecast. Additionally, it expects write-downs linked to Volkswagen to be at the higher end of its estimated range of 7 billion to 20 billion euros, as Volkswagen continues its extensive cost-cutting measures.
The latest developments highlight the challenges Porsche faces as it navigates a changing automotive landscape and seeks to reassure investors about its long-term growth prospects.
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