Tariffs, softened EV sales targets and threat from Chinese brands have forced a total rethink for Porsche
Present-day Porsche was built for a world that no longer exists, a world in which trade was largely free, regulations were converging towards electric and its Germany-centred technological superiority allowed it to charge higher prices than its peers.
Now all these conditions have been challenged or changed. Tariffs imposed by US president Donald Trump cost Porsche €700 million last year, while his determination to reset all environmental regulations means the country is no longer on the electrification path.
Meanwhile, rapid technological advances made by Chinese brands forged in the white heat of competition have eroded Porsche’s pricing power in China. Back in 2022, this was Porsche’s biggest market with almost 100,000 cars delivered. Last year that number had halved to 41,938.
All this upheaval has had a catastrophic effect on Porsche’s operating profit, down from €7.3 billion in 2023 to €413 million last year.
Profit margin stood at just 1.1%, down from 18%, after Porsche was forced to write off €3.1bn to reverse advanced electrification plans, including kicking a high-tech EV platform (dubbed SSP 61) into the long grass.
Reinventing Porsche for this new era is former McLaren boss Michael Leiters, who replaced Volkswagen Group head Oliver Blume on 1 January.
He will get to lay out a fully formed plan in the autumn, which he hopes will rebuild Porsche into a company that can ride out the global shocks and get back to margins of around 15%.
However, time isn’t on the side of CEOs of listed companies that have lost their profitable mojo, and on 11 March Leiters had to persuade financial analysts that he at least had a grasp on the situation.
After laying out his bona fides (CEO of McLaren, CTO of Ferrari for eight years, 13 years at Porsche), he was blunt about the size of the job. “Our clear priority is to fundamentally realign Porsche,” he said.
Almost immediately it was obvious how tough this would be. Leiters clearly doesn’t want to shrink Porsche’s sales further from the 265,663 recorded last year, down almost 50,000 from the year before. But he also stressed ‘value over volume’, ie keeping prices high. “That doesn’t mean I don’t care about volume, so please understand both are important, but value is more important than volume,” he said, carefully threading the needle.
In China, however, that strategy will inevitably result in volumes falling further as Porsche defends its pricing. The company expects to take a €200m hit in 2026 because of this. “China is a market we continue to believe in, especially in the higher segments and for internal combustion engines,” Leiters said. However there’s no push to beat competitors, especially on EVs. “We are not willing to play that game on the discount side,” Leiters said. Porsche will cut its number of dealers in China from 100 to 80.
Competition in China has now got so tough that sending over global products doesn’t cut it: you need to spend more to design for local requirements. And Porsche is bowing to the pressure, starting with a new locally developed infotainment system, due to be rolled out later this year.
Lower volumes globally are going to be the norm until new products arrive. Porsche’s “more selective product offering”, with the new 718 Boxster/Cayman in limbo and the Audi-based ICE Macan replacement not arriving until 2028, is going to have an effect. “We expect significantly lower vehicle sales this year,” CFO Jochen Breckner warned on the call.
Finding profits in a period of lower volumes means cost-cutting, and Leiters warned of more job losses on top of the 1900 already promised by 2029. He spoke of arriving to find an organisation sized for a different world. “One of the challenges we have is to reduce a significant bureaucracy I found here,” he said. “Under the changed conditions, the previously planned [headcount] reduction will not be sufficient.”
Another delicate operation will be Leiters’ stated aim to use more Volkswagen Group technology, platforms and modules to save money without diluting the ‘Porscheness’ of Porsche’s products. The €1bn paid to Audi doesn’t just secure it the Q5’s Premium Platform Combustion (PPC) platform for the new Macan but also other models going forward, Leiters said.
He didn’t mention which ones, but Porsche’s new ‘K1’ ICE SUV, which will sit above the Cayenne, likely due in 2028, is twinned with the upcoming Audi Q9.
“We are analysing where we can unlock additional synergies across our models,” Leiters said. “It is very important to use these commonalities and synergies, [but] we have to make sure that this is a real Porsche.”
The danger is that an Audi-based Macan is too dilutive to Porsche pricing, given the reduced levels of aristocratic blood in its fuel pipes. Indeed, one analyst wondered if the model should be scrapped altogether. Porsche, however, wants to continue to have its cake and eat it. “The Porsche brand is characterised by exclusivity and approachability,” Leiters said. “The Macan is an excellent example of this.”
Porsche’s average selling price is already enviable, at €121,000, up from €117,000 in 2024, helped by the continued success of the 911 sports car family. Leiters wants to boost this by adding more models at the top end, confirming plans to launch new flagship two-door sports cars above the 911 as well as the more expensive SUV.
What he has to hope is that this boost in average selling price covers the higher cost of doing business in the new world order. For example, he said that Porsche is looking into building cars in the US, which Leiters described as “compelling” while also warning that it would be incredibly expensive.
Porsche has previously denied reports that it would shift some production from Europe to the US, but €700m of annual tariff punishment and the ability of Mercedes-Benz and BMW to sell their American-made SUVs more cheaply might finally swing the decision, especially given the fact that the US is now Porsche’s biggest market.
