Porsche is reversing course on its aggressive push into electric vehicles (EVs), announcing a return to combustion engines and hybrids after facing disappointing demand for its fully electric models, particularly in China.
The German automaker will invest €800 million in expanding its internal combustion engine (ICE) and plug-in hybrid (PHEV) offerings, aiming to meet consumer preferences amid a slowing EV market. The shift comes at a cost, with 2025 profit margins expected to fall to 10-12%, well below its long-term 20% profitability goal.
Shares of Porsche AG fell 6% following the announcement, while Porsche SE—the holding company controlled by the Porsche-Piëch family—warned of a €2.5-3.5 billion writedown on its stake in the sports car brand, nearly double its prior estimate.
China Market Struggles and EV Setbacks
Porsche’s 2024 deliveries fell 3%, largely driven by a 28% decline in China, where its electric Taycan sedan failed to gain traction against aggressive local competitors. While the company had bet heavily on China’s EV market, Chinese consumers have shown a stronger preference for domestic EV brands, leaving Porsche struggling to compete.
Internal Struggles and Management Shake-Up
The shift in strategy has coincided with management turmoil at Porsche. Reports indicate that the company is in talks to remove CFO Lutz Meschke and sales chief Detlev von Platen. Sources suggest the move stems from internal disagreements over Porsche’s EV strategy and declining sales performance.
Additionally, a power struggle between Meschke and CEO Oliver Blume, who also leads Volkswagen, is said to be contributing to the leadership shake-up.
Porsche SE Faces Rising Debt Obligations
Porsche SE, the family-controlled investment vehicle, faces a €5.2 billion net debt burden, stemming in part from its 2022 acquisition of a 25% stake in Porsche AG. While only a small portion of this debt is due in 2025, over €2 billion in loans and bonds must be repaid by 2028, raising concerns over the group’s financial flexibility.
Deutsche Bank analysts welcomed Porsche’s decision to prioritize combustion engine models, even though it increases costs in the short term. They noted that Porsche is taking steps to "right-size" production to reflect weaker global demand, especially in China.
The move also signals a broader trend in the automotive industry, as several legacy automakers including Mercedes-Benz and Ford have scaled back their EV expansion plans amid slowing consumer adoption and infrastructure challenges.
Despite this pivot, Porsche remains committed to electrification in the long term, with plans to expand hybrid models while cautiously proceeding with EV development.
