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Thursday / 20 June 2024
HomeFeaturesPorsche takes a big hit

Porsche takes a big hit

Porsche’s profit plummeted during the first quarter for the weakest result since listing in September 2022 with model changeovers and soft demand in China weighing on the manufacturer’s outlook.

Operating profit declined 30% to €1.28 billion (R26 billion), the Volkswagen brand said Friday, with reticent consumers in China adding to struggles for vehicles to clear customs in the US.

Porsche had marked the start of the year as a likely low point as the 911 maker worked on launching four revamped models.

While order books are mostly full for the year, the new vehicles like the electric Macan and 911 will weigh on output and returns during the coming months, Chief Financial Officer Lutz Meschke said on a media call.

There should be a “strong acceleration” in profit for 2025, he said.

Returns in the three months through March fell to 14.2%, below the carmaker’s annual guidance and below analyst expectations.

The Zuffenhausen, Germany-based company still stuck to its full-year guidance, including expected group revenue of as much as €42 billion (R846 billion).

In addition to development spending for the new models, Porsche made significant investments on in-car technology and driver experience, the company said.

Looking ahead, the brand expects earnings and profitability to normalize at a 17% to 19% range in 2025, Meschke said.

While luxury car-makers like Porsche are more insulated from downturns, demand has fizzled in China, where consumers are contending with a real estate crisis and weaker economy.

The CFO said he expected “some” recovery in China during the second half of the year.

First-quarter deliveries in Porsche’s biggest market slumped 24% to 16,340 vehicles, with China accounting for just over a fifth of total sales.

“We need to see more evidence of management’s grip on the processes it can control and on some stabilization of its position in China,” Bernstein analyst Stephen Reitman said in a note ahead of the earnings.

Meschke this week attended the Beijing car show, where the latest tech advances by local players like China’s EV leader BYD were on display.

“It’s quite impressive what the local Chinese brands are doing when it comes to electrification,” Meschke said.

“The efforts of local Chinese brands are enormous — we have to closely monitor the situation as European players.”

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