Porsche expects lower returns in year of major model launches

Porsche expects its profit margins to tick downwards in 2024 as the German luxury carmaker incurs costs to launch four new models it hopes will carry it through a more challenging phase for European carmakers.

The group, majority-owned by Europe's top carmaker Volkswagen, is targeting an operating return on sales in the range of 15-17% in 2024, below the 17.4% average analyst forecast in an LSEG poll and down from 18% in 2023.

Shares in the group, which was carved out and separately listed in a mega-IPO in 2022, were up 0.5% on Tuesday morning, with traders pointing to fourth-quarter results that were slightly ahead of estimates.

However, Citi analysts said the 2024 outlook was disappointing.

“Porsche will focus on brand and pricing in future, but to do this the product range needed to be renewed. This is happening, but the full impact on pricing and profitability will take time and come from a lower base,” they said.

The muted outlook chimes with parent Volkswagen, which earlier this month said sales growth would slow in 2024 due to headwinds including from weaker economic growth, stiffer competition and higher costs.

Porsche maintained its medium-term margin outlook of 17% to 19%. In the long-term, it continues to expect more than 20%.

The company's shares are down nearly 1% year-to-date, underperforming a 10% increase in the STOXX Europe 600 Automobiles & Parts index, with analysts pointing to fierce competition in China and expected ramp-up costs for the new model launches.

With four new launches in its Panamera, Macan, Taycan and 911 model lines planned for 2024, Porsche said it is planning the biggest year of product launches in the company's history.

Shares in rival Ferrari are up about a quarter over the same period.

Porsche posted sales of €40.5bn (about R822,319,088,310) for 2023, largely in line with an LSEG estimate, while the return on sales beat expectations for an operating margin of 17.7%.