Porsche Announces Cost Cuts Amid Profit Slump

Porsche AG is embarking on a significant restructuring plan aimed at cutting costs across the entire value chain, responding to a weakening performance, particularly in the crucial Chinese market. The initiative, dubbed "Sportwagenschmiede '35", seeks to improve profitability by streamlining operations and focusing on higher-margin vehicles, following a 91.4% year-over-year decline in net profit after tax to €310 million.

The cost-cutting measures target multiple areas: development costs for future models are to be reduced by up to 20%, manufacturing personnel costs by up to 30%, and sales and distribution expenses by 20%. Material costs are targeted for a roughly 10% reduction. The company also intends to reduce the number of model variants offered. These efforts come as Porsche adjusts to a projected slowdown in growth within China, previously a key driver of profitability.

Alongside cost reductions, Porsche plans to increase the proportion of higher-priced vehicles in its sales mix, aiming to raise the average selling price of its top 10,000 vehicles from €270,000 to €330,000 by 2030. This will be achieved through the introduction of more expensive models, including a larger SUV and a high-end sports car positioned above the 911. Management positions are to be reduced by 40% in the medium term. The company also aims to lower the sales volume required to reach its profit threshold, shifting from a prior baseline of 350,000 units.

The profit decline follows a period of investment and expansion, and is exacerbated by factors including falling sales—particularly in China—reduced demand for electric vehicles, and the impact of US tariffs. A previous agreement to reduce the workforce by 5,000 jobs in the Stuttgart region by 2035, avoiding compulsory redundancies, underscores the scale of the restructuring. This move follows earlier workforce reductions at Porsche’s Leipzig plant and subsidiaries, with the goal of a 25% overall workforce reduction, potentially reaching 30%.