Porsche (P911_p.DE) saw its shares fall by 7.5% by late morning on Monday after the carmaker scaled back its electric vehicle rollout and lowered its forecast, following a costly strategic reversal driven by weak demand.

Volkswagen, Porsche’s parent company, and its holding company Porsche SE (PSHG_p.DE), the largest shareholder of Volkswagen, both saw declines of 7% and 7.6%, respectively.

Porsche announced a delay in the launch of several all-electric models on Friday, marking further trouble for the company. Its profits were almost wiped out in the second quarter, facing pressure from China, its key market, and higher U.S. tariffs.

The strategy shift is projected to reduce operating profits by up to 1.8 billion euros ($2.12 billion) this year. Porsche now expects its 2025 profit margin to be no more than 2%, down from an earlier forecast of 5% to 7%.

Some analysts viewed the guidance cut as inevitable, given the pressure on Porsche to prolong the life of its combustion engine due to weak demand for electric vehicles. However, Porsche has stated that it expects the realignment to benefit the company in the medium to long term.

CORRECTING THE EV 'MISTAKE'

At the IAA auto show in Munich, the Porsche logo was displayed on a vehicle at the exhibition pavilion. The company said the overhaul would result in a 5.1 billion euro hit for Volkswagen, its 75.4%-owned subsidiary.

Volkswagen lowered its profit margin outlook to 2% to 3%, down from the previous range of 4% to 5%, while Porsche SE also revised its profit after tax forecast.

Jefferies analysts suggested that Porsche’s outlook revision – the third of the year – may be the last but warned that it could face product cycle and brand challenges. With much of the 1.8 billion euro charge expected to hit in the third quarter, the analysts anticipate a loss for Porsche in the second half.

One local trader called the strategic decision "inevitable" and cautioned that the company had become too reliant on electric vehicles. "The correction of the former mistake to become too dependent on EVs will take time," the trader added, speaking on condition of anonymity.

Problems at Porsche and Volkswagen have led shareholders to call for Oliver Blume to end his dual role as CEO of both companies.

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