Earlier today, Porsche AG shares in Germany experienced a significant drop, the largest on record, following the announcement that the struggling sports car maker would be scaling back its electric vehicle (EV) rollout. Porsche has abandoned plans for a future battery-powered luxury SUV and is refocusing on petrol-powered engines and hybrid models. This decision is expected to result in a $2.1 billion hit to operating profit, leading both Porsche and its parent company, Volkswagen AG, to revise their full-year forecasts.
“Markets are being negatively impacted by the automotive sector, with the STOXX Europe 600 Automobiles & Parts Index [SXAP] declining by 2.8%. This follows profit warnings from both Porsche and Volkswagen after the market close on Friday. Porsche AG is down 7.8%, while Volkswagen is down 8%,” stated UBS analyst Marisa Vethanayagam in a recent client update.
Friday’s profit warning marked the fourth time this year that Porsche has lowered its guidance, resulting in a 28% decrease in share value year-to-date. This decline has been so significant that the automaker is at risk of being removed from the DAX, Germany’s benchmark index.
The challenges facing Porsche, including weak EV sales in key markets and increased competition from Chinese automakers, are starting to weigh heavily on its parent company, Volkswagen. Volkswagen recently announced a $3.5 billion non-cash impairment related to Porsche’s impact on operating profit and revised its operating return on sales forecast for this year to 2% to 3%, down from 5%.
In addition to Porsche and Volkswagen, other European automotive companies like Stellantis NV and Renault SA are also grappling with sluggish EV demand despite significant investments in the technology.
Various top Wall Street research firms have commented on Porsche’s decision to scale back its EV unit, leading to a guidance cut and impacting peers across Europe. Here are some insights from Bloomberg:
RBC (Sector perform, PT EU43)
Analyst Tom Narayan highlights significant near-term pressures due to delays in the EV platform and a shift toward hybrid and combustion drivetrains, indicating challenges in the electrification strategy
The updated 2025 guidance reflects a sharp decline in profitability
Concerns are raised about Porsche’s ability to compete effectively in the premium EV and luxury segment amid growing competition
Jefferies (hold, PT EU40)
Analyst Philippe Houchois believes that the revised guidance may be the final adjustment, but it prolongs the turnaround process due to product cycle and brand challenges
In addition to the impact on Porsche, VW’s guidance delays cash conversion once again
The price target for Porsche is reduced to €40 from €47
Citi (buy, PT EU58)
Analyst Harald Hendrikse notes that exceptional charges have lowered the FY25 Ebit margin guidance from 5%-7% to between 0% and 2%, which is considered unacceptable for the Porsche brand
Investors remain skeptical until Porsche stops delivering negative surprises, and shares are expected to remain subdued
According to independent auto analyst Matthias Schmidt, luxury electric cars are currently undervalued by auto buyers, prompting Porsche to refocus on high-margin combustion-engine models.
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