Porsche‘s margins plunged in the first quarter, the sports car maker said on Tuesday, forcing it to cut its outlook due to weakness in its key market China, a slowing shift to electric cars and US tariffs that are disrupting the global car industry.
Like other European carmakers, Porsche has been dealt a severe blow by the tariffs, which are expected to raise car prices by thousands of dollars and rattle an automobile sector already struggling with high costs and intensifying competition.
With no US production, Porsche is heavily exposed and along with a 25 per cent plunge in its share price year-to-date, it has suffered a loss of investor confidence since it was listed by majority-owner Volkswagen in 2022.
Analysts, during a call discussing a first-quarter margin drop to 8.6 per cent from 14.2 per cent, repeatedly asked finance chief Jochen Breckner on how he intended to restore trust, also citing a number of warnings over the past 18 months.
“It increasingly just feels like every time you meet with your supervisor board the situation gets incrementally worse than what you feared, on multiple levels,” Tim Rokossa of Deutsche Bank said.
Patrick Hummel of UBS also called for a quick management board reshuffle, hinting at Oliver Blume’s dual role as Porsche and Volkswagen CEO that has for years drawn the ire of investors.
Breckner said that tariffs resulted in a hit of at least €100 million ($114 million) in April and May, but added that the carmaker had so far not raised prices but will do so if duties remain in place.
“We see a very special and challenging situation,” Breckner said, citing falling demand and fierce competition in China, a slower-than-expected transition to EVs and US tariffs.
He said localising production in the United States made no sense at the moment due to Porsche‘s low vehicle sales figures, even if the group were to team up with another VW brand.
Shares in Porsche were down 6.4 per cent at 1012 GMT, at the bottom of Frankfurt’s blue-chip index.
In April, Porsche said it had shipped added inventory to the United States to get ahead of tariffs.
It said late on Monday that the tariffs, in place since April at 25 per cent, weighed on its business and that its adjusted outlook did not factor in their future effects beyond May.
Porsche said it now expects revenue of between €37 billion ($42.1 billion) and €38 billion in 2025, down from its previous forecast of €39 billion to €40 billion. Its profit margin is forecast to drop to 6.5-8.5 per cent, down from a previous forecast of 10-12 per cent.
According to the average of analyst estimates in an LSEG poll, Porsche‘s operating margin is seen at 9.7 per cent on revenue of €38.8 billion.
Porsche also said it would no longer pursue plans to expand high-performance battery production at its Cellforce subsidiary, and it cited a decline in demand in China for all-electric luxury cars.
“We believe … the firm is taking the opportunity to kitchen sink estimates,” JP Morgan analysts said.
The carmaker, which at its stock market debut in 2022 had a higher valuation than its parent company Volkswagen AG, has fallen from grace, struggling in particular with low sales in China, which fell 42 per cent in the first quarter.
Bill Russo, CEO of Shanghai-based advisory firm Automobility, said Chinese customers of electric cars had been drawn to domestic brands because of their improved technological offering.
“No foreign company believed that the Chinese could somehow build equity that was superior to the foreign brands, especially the Europeans.”
