Porsche weighs price hikes, cost cuts to offset 2025 earnings pressure

Porsche warned on Wednesday that lower sales, high costs and trade concerns would hurt 2025 earnings, even before a possible hike in US tariffs on EU imports, making it the biggest percentage decliner on Europe's benchmark stock index.

The carmaker was assessing how to pass on to consumers the likely surge in US tariffs on European imports to 25% — from 2.5% now — without pressuring margins, implying vehicle prices may be raised to offset any drop in unit sales.

The US is Porsche's biggest market, making up 25% of unit sales in 2024, but like Volkswagen's Audi, it has no US manufacturing base and imports its cars from abroad.

“For now, we are hoping there are solutions that will lead to a sensible tariff regime between regions,” CFO Jochen Breckner said on a press call after Porche's annual results.

Like its parent Volkswagen, Porsche is in the midst of a cost-cutting drive, shrinking its workforce by nearly 4,000 jobs and planning further cuts. Porsche had warned last month that profits would take a hit because of an €800m (R16bn) spend on new internal combustion engine and hybrid models.

Sales dropped 3% last year and it expects even lower sales this year, with the depreciation of recent investments squeezing its margins to just 10%-12%, without taking into account the impact of added tariffs.

It also pared back its midterm profit margin target — which Breckner expected to hit towards the end of this decade — to 15%-17%, from 17%-19%.

Shares sank 4.5% in late morning trading, the biggest decliner in percentage terms on Germany's DAX index and near their lowest point since listing in September 2022.

Porsche has fallen from grace since its stock market debut, struggling particularly in China, where sales plunged 28% in 2024 as consumers refrained from luxury spending amid a real estate crisis and as electric vehicle-only Chinese start-ups won market share.

China made up 18% of Porsche's unit sales last year.

Porsche is planning to improve its software and make a greater effort to push its heritage design to win back customers, CEO Oliver Blume said.

It will also cut costs further in its dealer network and own operations to protect margins despite lower volume sales, he said.

Global operating profit fell 22.6% in 2024 to €5.6bn (R112.14bn), yielding a return on sales of 14.1% despite revenue remaining roughly on the previous year's level, as renewing five out of six of its model lines weighed on earnings.