Porsche slashes outlook as US tariffs, China slump dim prospects

Porsche has revised its outlook downward after a sharp drop in margins in the first quarter, citing weak demand in China, a slower shift to electric vehicles, and the impact of U.S. tariffs on the global auto industry.

Porsche's margins dropped sharply in the first quarter, the sports car manufacturer revealed on Tuesday, prompting a downward revision of its outlook due to weakening demand in China, a slower-than-expected shift to electric vehicles (EVs), and disruptions caused by U.S. tariffs on the global car industry.

Like other European automakers, Porsche has been significantly impacted by the tariffs, which are anticipated to raise car prices by thousands of dollars and add strain to an already challenged automotive sector dealing with high costs and mounting competition.

With no production in the U.S., Porsche remains highly exposed, and along with a 25% drop in its share price year-to-date, the company has seen a decline in investor confidence since its listing by its majority-owner Volkswagen in 2022.

During a call discussing a first-quarter margin drop to 8.6% from 14.2%, analysts pressed Porsche’s finance chief Jochen Breckner on plans to restore investor trust, citing multiple warnings over the past 18 months.

"It increasingly feels like every meeting with your supervisory board leaves the situation progressively worse than anticipated," said Tim Rokossa from Deutsche Bank.

UBS’s Patrick Hummel also called for a swift reshuffle of the management board, suggesting that Porsche and Volkswagen CEO Oliver Blume's dual role has long been a point of contention for investors.

Breckner confirmed that the tariffs had resulted in a loss of at least €100 million ($114 million) in April and May, but noted that the company had not raised prices yet, though it would consider doing so if the duties persist.

"We’re facing a very unique and challenging situation," Breckner stated, pointing to a decline in demand and intense competition in China, a slower transition to EVs, and U.S. tariffs.

He also noted that setting up local production in the U.S. did not make sense given Porsche’s low vehicle sales there, even with the possibility of teaming up with other Volkswagen brands.

Shares in Porsche were down 6.4% at 1012 GMT, placing the company at the bottom of Frankfurt's blue-chip index.

In April, Porsche announced it had shipped additional inventory to the U.S. to get ahead of the tariffs. It further stated that the 25% tariffs, which took effect in April, had impacted its business and that its revised outlook did not account for any future effects beyond May.

Porsche now expects revenue between €37 billion ($42.1 billion) and €38 billion in 2025, lower than its previous forecast of €39 billion to €40 billion. Its profit margin is now expected to drop to 6.5-8.5%, down from the earlier estimate of 10-12%.

Analysts' average estimates put Porsche’s operating margin at 9.7% on revenue of €38.8 billion, according to a poll by LSEG.

The company also announced it would halt plans to expand high-performance battery production at its Cellforce subsidiary, citing a decline in demand for all-electric luxury cars in China.

"We believe the company is taking this opportunity to set conservative estimates," analysts at JP Morgan said.

Once valued higher than its parent company Volkswagen at its stock market debut in 2022, Porsche has since struggled, particularly with low sales in China, which plummeted 42% in the first quarter.

Bill Russo, CEO of Shanghai-based advisory firm Automobility, explained that Chinese customers have increasingly turned to domestic electric vehicle brands due to their improved technological offerings.

"No foreign company expected Chinese brands to surpass the foreign ones in terms of equity, especially European brands," Russo said.

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