Porsche Shares Slide as Weak Sales and High Costs Hit Margins

Porsche Shares Slide as Weak Sales and High Costs Hit Margins

Porsche’s shares fell 4.9% in Frankfurt on Wednesday after the company issued its second profit warning in two months, pointing out falling sales and mounting costs. 

The company reported group sales revenue of €40.1 billion for 2024, down 1% from the previous year. Operating profit dropped to €5.6 billion from €7.3 billion in 2023, cutting the operating return on sales from 18% to 14.1%. The decline shows narrowing profit margins as the company faces rising competition and weaker consumer demand.

Porsche recently announced plans to cut nearly 4,000 jobs as part of a broader restructuring strategy. Around 1,900 jobs will be eliminated by 2029, while 2,000 fixed-term contracts are set to expire this year. 

Employees are being encouraged to accept severance packages or early retirement as the company tries to streamline operations and improve efficiency.

The broader auto industry has been grappling with challenges from uneven electric vehicle (EV) demand, shifting regulatory environments, and increasing competition from Chinese manufacturers such as BYD and Geely. 

What Does This Mean for Me?

Luxury carmakers like Audi and Mercedes-Benz are also struggling with falling demand in China, where rising living costs have made consumers hesitant to spend on high-end products. High interest rates and inflation across Europe have further weakened consumer confidence, leading to softer demand for electric vehicles.

Porsche is targeting a long-term return on sales of over 20%, but the company expects margins to remain between 15% and 17% in the medium term as it navigates a challenging market environment.

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