October 27, 2024 Benoit Charette
Porsche plans major financial adjustments, aiming for savings of several billion euros by 2030, according to Chief Financial Officer Lutz Meschke. The statement followed the release of a sharp 41% drop in third-quarter operating profit. To counter this fall, Porsche announced a reduction in its dealer network in China, a market which is experiencing persistently declining demand and which is seriously affecting European manufacturers.
Reducing the footprint in China: a necessity in the face of new realities
“China represents a considerable challenge, and not only for Porsche,” said Meschke. He explained that in the future it would be unrealistic for European brands to expect the same level of growth in China as before. Porsche, majority controlled by Volkswagen, is therefore adjusting its cost structure to align with annual global sales of around 250,000 units, compared to more than 300,000 vehicles sold in recent years.
Realignment of products and budgets for increased flexibility
Faced with falling demand and a slower than expected pace of the switch to electric, Porsche must reassess its offer, its budgets and its expenses. Meschke emphasized that this realignment aims to “further increase the flexibility and resilience” of the brand. In China, where the economic crisis is impacting purchases of luxury products, Porsche is facing a structural change in demand. Despite everything, Meschke clarified that the brand is not abandoning this market, even if it must significantly reduce its local dealer network to adapt to the new conditions.
Third Quarter Financial Performance
Operating profit for the third quarter was 974 million euros, a drop of 41%, below analysts’ expectations of 1.08 billion euros (LSEG). Sales fell to 9.1 billion euros, with an operating margin of 10.7%, far from the medium-term target of between 17% and 19%.
European automotive sector under pressure in China
Porsche’s recent announcements are in line with those of other European manufacturers such as BMW and Mercedes-Benz, also exposed to a strong dependence on the Chinese market. Mercedes-Benz announced plans on Friday to step up cost cuts after third-quarter profits halved, driven by weak demand and intense competition in China.
Perspectives 2024
Despite current challenges, Porsche confirms its forecasts for 2024, anticipating sales of 39 to 40 billion euros and an operating margin between 14% and 15%. According to LSEG estimates, analysts expect sales of around 39 billion euros for a profit margin of 13.8%.
With information from Reuters
About the author
Benoit Charette / Owner and editor-in-chief Benoit Charette has been practicing automotive journalism for 30 years. He is founder, owner and editor-in-chief of L’Annuel de l’automobile, which he has published since 2001. He hosted the shows RPM and RPM+ on V and Légendes de la route on Historia. On the radio since 1986, he hosts the show ça tête la route and participates for the second year in the show Passion Auto on RDS in addition to putting the official website of L’Annuel de l’automobile online on annualauto. That.
