Porsche’s EV pullback highlights cracks in German auto empire

Porsche’s EV pullback highlights cracks in German auto empire

Automotive News Europe — 2025-09-22

Automotive Industry

Porsche is hitting the brakes on electric vehicles, correcting an expensive strategy that has depressed the automaker’s margins and is dragging down parent Volkswagen Group.

Porsche shelved a future battery-powered luxury SUV and said it would add more combustion-engine and hybrid models to bolster its portfolio. The pivot is causing a €1.8 billion ($2.1 billion) hit to operating profit, forcing Porsche and VW to slash their outlook for the year. It’s yet another setback for Germany’s auto industry, which is contending with high costs and muted sales.

The Germans — like their European peers Stellantis and Renault — are grappling with lower-than-expected EV demand even after they poured billions of euros into the technology. Porsche has struggled to live up to expectations since its blockbuster 2022 listing, with a slowdown in China and U.S. tariffs also taking a toll. A profit warning on Sept. 19 was the fourth time the company has cut guidance this year, and the share price has fallen so low that Porsche is dropping out of the DAX, Germany’s benchmark index.

Auto buyers “are putting little value on luxury electric cars,” said Matthias Schmidt, an independent auto analyst based near Hamburg. “Porsche has now realized this and is jumping back into high-margin combustion-engine models.”

Part of the problem is Porsche’s struggles in China, the world’s biggest auto market, where luxury spending remains muted and local automakers led by BYD are dominating in EVs. The company is also among the hardest hit by President Donald Trump’s tariffs in the U.S., Porsche’s single biggest market, where it relies solely on imports.

The sports-car maker’s troubles are now increasingly catching up with its parent VW — the first among traditional automakers to engage in EVs — has already walked back some of its more ambitious battery plans and is undergoing a major restructuring to reduce costs.

The company on Sept. 19 warned that it will take a roughly €3 billion non-cash impairment related to Porsche’s moves and lowered its forecast for operating return on sales this year to 2 percent to 3 percent, down from as much as 5 percent.

VW has made some headway on EVs this year. It’s outselling Tesla, Stellantis and BYD in Europe and has unveiled several affordable battery models to further stoke demand. And automakers in the region may get regulatory relief after politicians, including German Chancellor Friedrich Merz, backed industry warnings that the European Union’s plan to have them sell only new EVs in ten years is unrealistic.

But VW’s luxury brands, which used to bolster margins, are struggling. The Audi group — which also includes Bentley, Lamborghini and motorcycle maker Ducati — in July lowered its outlook for the year after shipments fell in most major markets in the first half, including North America and the former profit driver China.

Porsche has replaced several executives and is slashing costs, including through job cuts, to get back on course. It also ditched a plan to produce its own batteries due to weak EV demand.

Still, the latest problems are putting more pressure on Oliver Blume, who is CEO of both companies, to relinquish the Porsche role and allow someone else to turn the brand around. The search for a new leader has begun, Bloomberg News reported last month, with the Porsche-Piëch owner family holding discussions with potential candidates.