Porsche AG’s shares fell by 7% on Friday, marking the steepest decline since the company’s stock market debut in 2022, according to Reuters.
The drop came after the luxury carmaker warned that the costs of launching new models and battery-related expenses would significantly impact its 2025 profit margins.
In a statement released late on Thursday, Porsche projected a profit margin of just 10-12% for the year, well below analysts’ expectations of 14.8% and its mid-term target of 17-19%.
The company attributed the decline to an €800 million ($832 million) hit from the development of new combustion engine and plug-in hybrid models, reflecting a strategic shift amid weak demand for electric vehicles (EVs) in Europe and fierce competition in China.
Porsche’s pivot back towards combustion engines highlights the challenges facing the automotive industry as EV adoption slows. The company, once valued higher than its parent firm Volkswagen AG, has seen its market capitalisation halve since its May 2023 peak of nearly €110 billion.
Shares fell 27% in 2024 alone, driven by sluggish EV sales and declining demand in China, its largest market.
Deutsche Bank analysts described the situation as Porsche’s “last shot” to regain investor confidence, warning that failure to turn around its performance could erode trust among long-term shareholders.
Leadership and financial strain
The margin forecast has raised concerns among investors, with Bernstein Research analyst Stephen Reitman calling it a “major concern.” Porsche’s management is expected to provide further details during its full-year results announcement on 12 March.
The company is also undergoing leadership changes, with talks underway to end the contracts of its chief financial officer and sales chief early. Both executives have faced criticism for Porsche’s underwhelming performance and declining share price.
Porsche SE, the investment firm controlled by the Piech and Porsche families, holds a 12.5% stake in Porsche AG and is the largest shareholder in Volkswagen. On Thursday, Porsche SE warned of impairments on its Porsche AG stake, nearly doubling its December forecast to €2.5-3.5 billion.
It also expects writedowns related to Volkswagen, which is implementing major cost-cutting measures, to reach the upper limit of its €7-20 billion forecast range.
As Porsche navigates these challenges, its ability to balance innovation, cost management, and market demands will be critical to restoring investor confidence and achieving its long-term goals.
