Porsche scales back EV plans as profits slide

Porsche is shifting gears on its electrification strategy, scaling back its ambitious EV plans to bolster combustion and hybrid powertrains. However, this strategic pivot comes with substantial costs and mounting challenges, as the automaker faces declining earnings, market uncertainty, and potential trade tariffs that could further disrupt its global operations.

More details have surfaced about Porsche’s decision to reinvest in combustion technology. The Stuttgart sports car maker is actively seeking to reconvert electric car architectures for ICE technology and will extend the lifeline of some current-generation engine blocks.

718 with a boxer engine?

The renewed strategy will require $831 million in 2025, covering production expansion and new development for hybrid and internal combustion engine models.

The financial strain is evident, as the sports car maker issued a profit warning with margins projected to drop to between 10% and 12%, significantly below earlier expectations, which were as high as 17%. Sales revenue forecasts remain stable at $40-$41 billion, but the cost of reworking the company’s product roadmap could take a toll on its long-term profitability.

Last year, Porsche announced it would continue V8 production for the Cayenne and Panamera beyond 2030. This latest move reinforces that commitment, with the company now considering hybrid or full-combustion versions of models initially planned as EVs. 

Meanwhile, development issues persist, notably with the next-generation 718, which will shift to a full-electric platform. Amid growing speculation, there are concerns that Porsche may also be contemplating a gasoline-driven variant to complement the all-electric model.

Market pressures

Porsche’s transition struggles extend beyond product strategy. The launch of the Cayenne EV has been delayed, casting doubt on its expected 2026 debut, while the fully electric Macan, the company’s best-selling SUV, could also see an ICE variant sooner than anticipated. 

Porsche’s initial EV efforts, led by the Taycan, gained traction following its 2020 debut but experienced a significant sales decline last year, particularly in China, where deliveries fell 28%. Troublesome, as the model received an extensive technology facelift in 2024, aiming at doing just the opposite: rebooting sales.

It’s clear that the milk from the cash cow within the Volkswagen Group is turning sour over China’s fiercely competitive EV market, where domestic brands such as Xiaomi and the SU7 are rapidly gaining market share.

For example, in November 2024, Xiaomi sold 23,000 units of its Taycan-rivaling SU7, while Porsche managed just 134 Taycans in China, signaling a drastic shift in consumer preference. Lowering prices isn’t an option for Porsche, which has already decided to downsize its Chinese dealership network.

The looming threat of US tariffs

Compounding Porsche’s challenges is the looming threat of higher tariffs on European imports to the United States, its largest market. With US President Donald Trump signaling a potential tariff increase from 2.5% to 10%, Porsche could face billions in lost earnings. 

Unlike some competitors, Porsche lacks an American production facility and cannot easily leverage parent company Volkswagen’s Tennessee plant, as its models do not share platforms with VW’s locally built vehicles.

Reportedly, the sports car maker is joining forces with the sister brand Audi to build SUVs in the US. This jointly won’t be a relocation of existing models. Still, it applies to the K1 large SUV currently under development. 

Leadership shake-up

The financial strain and strategic shifts have triggered internal turmoil at Porsche. CFO Lutz Meschke and sales chief Detlev von Platen were both ‘amicably’ urged to leave the company. Meschke, a veteran executive and key figure within Porsche’s leadership was widely regarded as a stabilizing force within the company.

He was also a confidant to the largest shareholder, the Porsche family. His sudden exit has caused Porsche’s stock to hit its lowest point since its 2022 stock listing.

Porsche’s ongoing struggles pose a significant challenge for Volkswagen Group’s CEO Oliver Blume, who also serves as Porsche’s chief executive. His dual leadership is under scrutiny, with calls growing louder for him to relinquish one of his top roles.