Porsche plunges into its darkest moment

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Author | Chai Xuchen

Editor | Wang Xiaojuan

Porsche, the German luxury car brand that has been synonymous with high performance and high profit “money printing” for decades, is now facing an unprecedented storm.

On October 25, Porsche released its third-quarter financial report. In the first three quarters, the operating profit of this German luxury car leader was only 40 million euros. It is important to know, this figure was 4.035 billion euros in the same period last year—a year-on-year plunge of 99%. Looking at the third quarter alone, Porsche has already entered a loss, with a deficit of 966 million euros for the quarter.

It can be said that Porsche is already teetering on the edge of swinging from profit to loss.

Porsche executives pointed out the current sources of profit pressure at the performance meeting: up to 3.1 billion euros in strategic restructuring costs; a more severe than expected decline in the Chinese market; profit erosion by high tariff policies in the North American market.

In August, Porsche announced the restructuring of its battery subsidiary Cellforce, giving up plans for in-house battery production; in September, it announced that it would launch more fuel and plug-in hybrid models. Behind the strategic adjustments lies massive financial waste, and indecision in the face of market competition has cost Porsche dearly.

Looking back, losing ground in China has become a major reason for Porsche’s current situation.

In the past, Porsche was a direct beneficiary of China’s economic boom, overtaking the US in 2015 to become the world’s largest single market, and from 2018 to 2021 its sales were still growing at a rate close to 40%. At its peak, one out of every three Porsches sold worldwide was sold in China, with nearly a quarter of the price being profit.

But now, Porsche’s sales in China have dropped from a peak of 96,000 four years ago to just 56,900 last year. In the first three quarters of this year, Porsche’s sales in China were only 32,000, a 26% decrease compared to the same period last year. Currently, China’s market share has shrunk to just 15% of its global sales, half of what it was at its peak.

Just three years ago, it was hard to imagine that Porsche, the top seller in China’s previously “hot-selling” luxury car market, would now struggle to sell.

Since last year, facing inventory pressure, Porsche dealers have offered significant discounts on many models. The price of the Porsche 911 has begun to soften, the coupe Panamera has more than a 10% discount space; the Macan’s price after discount drops to just over 440,000 yuan; the all-electric Taycan, originally a million-yuan supercar, has dropped to the 600,000 yuan range, with a discount enough to buy a Xiaomi SU7.

From “paying a markup and still can’t buy,” to now “hard to sell even after discounts,” the Porsche luxury car myth has been shattered, and crises abound.

Analysts told Wallstreetcn that for 20–30% of Porsche buyers, it was a ticket to enter high society, but now that high-cashflow industries like tutoring and micro-businesses have declined, these buyers are gradually disappearing; the remaining high-net-worth demographic, facing consumption downgrade and the rise of domestic luxury brands, are reconsidering their choices.

A practitioner from a domestic high-end brand pointed out that Porsche used to have absolute authority in the million-yuan luxury car market, but in the past two years, China’s new energy vehicle market has developed rapidly, and independent brands have entered the million-yuan segment as challengers. NIO, Zeekr, AITO and other brands have also started to target Porsche’s core territory.

Moreover, in the around-500,000-yuan price range, where the entry-level Macan used to contribute the majority of Porsche’s sales, it now faces tough competition from new players like Xiaomi SU7 Ultra, NIO ET5T, Zeekr 001, suffering a “dimensionality reduction attack” in terms of intelligence and electric “horsepower.”

The electric vehicles that Porsche had hoped to become its second growth curve have not taken up the slack, but rather become a drag. From January to September this year, global deliveries of the all-electric Taycan were 12,641 units, down 10% year-on-year.

“It’s not that rich Chinese aren’t spending, but rather they no longer see Porsche as a first choice.” An executive of a new upstart brand told Wallstreetcn, “It’s not that Porsche isn’t working hard, but the Chinese luxury car market is not what it used to be.”

For this German luxury brand, its collapse in China and the loss of direction in global strategy are a microcosm of the struggles facing traditional luxury giants in the transition to the intelligent electric era.

In the first three quarters, Mercedes-Benz’s sales in China fell 18% year-on-year, leading the decline among major global markets; BMW’s sales in China fell 11.2% year-on-year over the same period; likewise, due to losing China, Mercedes-Benz’s third quarter sales remained in negative growth.

Facing the surge of domestic upstarts, the traditional strong players all seem at a loss, wavering between lowering inventory and prices or maintaining brand tone, and swinging between going fully electric or returning to internal combustion. A century of automotive history spells out for latecomers that in times of change, no one’s throne is forever.

Porsche, now plunged into its darkest hour, has finally compromised with reality—choosing to safeguard profit and re-embrace the internal combustion engine.

According to plan, in the next five years, in addition to brand-new internal combustion versions of the Cayenne, 911 and Panamera, Porsche will also launch two brand-new B- and D-series SUV products, focusing on fuel and plug-in hybrid models.

In terms of electrification, Porsche has not stopped, but is more cautious. Next, the Taycan and Macan will continue to push toward full electrification; all-electric versions of Cayenne and 718 will also launch over time; and in the long-term plan, Porsche’s all-electric models will be replanned after the release of a new pure-electric platform after 2030. This means Porsche has delayed full electrification by at least five years.

As for the all-important Chinese market, Porsche executives admitted at the performance meeting that the slump cannot be alleviated in the short term, but they are still trying a series of combined moves in China.

Porsche is first pushing integration and optimization on the channel end, planning to reduce the number of dealerships to around 100 by 2026 and increasing investment in first-tier cities, aiming to improve operational efficiency and profitability. Beyond sales, Porsche is also accelerating local production and R&D, recently establishing a Shanghai R&D center, with a 300-person team leading the development of a dedicated in-car operating system, to be fitted in all Porsche models in 2026.

At first glance, Porsche seems to be showing the right attitude to win back the Chinese market, but whether these strategies will be effective remains to be seen.

In this time of crisis, to help the company weather the storm, Porsche has brought in a new chief, appointing Michael Leiters as the new CEO. This Porsche veteran spent 13 years in the R&D department and was responsible for developing the core models Macan and Cayenne.

Though there are new strategies and new leadership, there remain countless issues for Porsche to unravel. How to eliminate the entrenched problems underlying its former glory amid the rapid changes in the Chinese market is the key to Porsche’s revival in China.

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