Porsche announced it will reduce its dealership network in China, as weakening demand in the world’s largest auto market weighs on European carmakers. The German luxury automaker, majority-owned by Volkswagen, aims to implement cost-saving measures totaling billions of euros by 2030, according to Chief Financial Officer Lutz Meschke.
The decision comes on the heels of a sharp 41% decline in Porsche’s third-quarter operating profit, signaling the financial pressures facing European manufacturers in the region.
“China is an incredible challenge, not just for Porsche,” Meschke stated, noting that demand in China is unlikely to return to previous levels for European brands. He emphasized that Porsche’s cost structure will be adjusted based on a projected annual vehicle sales target of around 250,000 units globally, down from the previous benchmark of over 300,000 units.
The automaker’s strategy includes reassessing its product lineup, budget, and cost allocations to boost flexibility and resilience amid a shifting Chinese market where economic strains have dampened luxury spending.
For the third quarter, Porsche reported an operating profit of 974 million euros ($1.05 billion), missing the average analyst estimate of 1.08 billion euros, according to LSEG data. Revenue also dropped, falling to 9.1 billion euros, with an operating margin of 10.7% — well below its medium-term outlook of 17% to 19%.
Despite these challenges, Porsche reaffirmed its forecast for 2024, with anticipated sales between 39 billion and 40 billion euros and an operating margin of 14% to 15%, in line with analysts’ average profit margin estimate of 13.8%.
The sentiment reflects similar pressures on other European automakers like BMW and Mercedes-Benz, both of which are also experiencing stagnating demand in China. Last week, Mercedes-Benz announced increased cost-cutting efforts after reporting a steep drop in third-quarter earnings, citing soft demand and rising competition in the Chinese market.
