Porsche is set to reduce its dealership network in China, responding to ongoing weak demand in the world’s largest auto market, which has significantly impacted European carmakers and prompted cost-cutting measures to protect profit margins.
Chief Financial Officer Lutz Meschke announced the company’s strategy following a 41% decline in third-quarter operating profit. “China is an incredible challenge, not just for Porsche,” he remarked, emphasizing the need to adjust expectations for future growth in the region. Meschke indicated that the company would realign its cost structure to reflect anticipated annual vehicle sales of around 250,000, down from over 300,000 in previous years.
Porsche, which is majority-owned by Volkswagen, cited weaker demand in China and a slower-than-expected transition to electric vehicles as key factors driving a review of its product lineup, budgets, and overall costs. “Our goal is to enhance our flexibility and resilience,” Meschke stated, acknowledging a structural shift in consumer demand influenced by an economic downturn affecting luxury goods spending.
Despite the challenges, Meschke assured that Porsche is not abandoning the Chinese market but must confront current realities, predicting that vehicle sales in the region would stagnate in 2025 compared to this year.
The company’s third-quarter operating profit fell to 974 million euros ($1.05 billion), missing analysts’ average estimate of 1.08 billion euros. Sales for the quarter also declined to 9.1 billion euros, leading to an operating margin of 10.7%, significantly lower than Porsche’s medium-term target of 17%-19%.
Porsche’s situation mirrors that of its peers, BMW and Mercedes-Benz, which are also facing pressure to cut costs and explore sales growth outside of China. Mercedes-Benz recently announced plans to intensify cost-cutting efforts after its earnings halved in the third quarter due to lackluster demand and increased competition in the Chinese market.
Despite these challenges, Porsche reaffirmed its 2024 outlook, anticipating sales between 39 billion to 40 billion euros and an operating margin of 14%-15%. Analysts project similar figures, estimating 2024 sales at around 39 billion euros with a profit margin of approximately 13.8%.
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