Porsche, the renowned luxury automaker, announced on Wednesday its decision to maintain dividends for 2024 at the previous year’s level despite a notable decline in net profit by 30.4%, as reported by Reuters. The company faces significant operational cost pressures and decreased demand in the Chinese market.
Amid challenging economic conditions, Porsche has adjusted its mid-term profitability target to 15–17%, down from the previous 17–19%. This move reflects the need for a more prudent approach to resource management and cost control in current market conditions.
1. High Production Costs. Increasing production costs are impacting profitability margins.
2. Weak Demand in China. China, a crucial market for Porsche, witnessed a sales decline of 28% in 2024.
Last month, Porsche shares experienced their worst day on the stock market. This was triggered by the company's warning of a 10–12% profit reduction in 2025. A significant factor is the anticipated €800 million impact due to the transition toward producing more internal combustion engine and hybrid models.
Strategic Priorities Include:
- Optimizing model lineup to reduce expenses.
- Adapting to evolving market conditions and consumer preferences.
Since its successful stock market debut in 2022, where Porsche's valuation exceeded that of its parent company Volkswagen AG, the brand's popularity has somewhat waned, particularly due to lower sales in China. Nonetheless, Porsche is keen to adjust to new circumstances, mainly by optimizing business processes and reducing workforce.
Mirroring Volkswagen's warning about stagnant profits in 2025, Porsche is focusing on cutting expenses and optimizing production processes. The long-term ambition is to achieve a profit margin of 20%.
These efforts are geared towards strengthening financial resilience and improving the company's market position globally, a critical move in the face of heightened competition and shifting consumer demands.
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