Porsche Lowers Profit Target Due to Tariffs and China Woes

Post by : Monika

Photo: Reuters

In July 2025, Porsche, the famous German maker of luxury sports cars owned by Volkswagen, delivered a serious update. The company said it now expects its profit margin for the full year to fall to 5–7%, down from the earlier forecast of 6.5–8.5%.

This weaker outlook follows a €400 million loss tied to U.S. import tariffs in the first half of the year. The shift reflects growing trade costs, weak car sales in China, and slow uptake of electric vehicles (EVs).

A Major Hit from U.S. Tariffs
Starting August 1, a new trade deal introduced a 15% import duty on European-made cars entering the U.S. Porsche makes nearly all its cars in Germany, so it cannot avoid this specific rule. As a result, it recorded a €400 million tariff-related loss in H1 2025. That turned what had been a solid profit forecast into a much tighter range of 5–7%, down from earlier guidance of 6.5–8.5%.

Despite this, Porsche did not revise its projected annual revenue. It still expects to reach €37–38 billion in sales, but realizes margins will be thinner because of the new cost.

Operating Profit Collapses in Q2
Porsche’s operating profit in the second quarter plunged 91%, dropping to €154 million. A year ago, the company had much stronger profit in the same period. This steep decline is tied to both trade losses and rising operational costs. At the same time, Porsche is undergoing a wide-ranging business restructuring, which added expenses.

China Sales Weakness and EV Delays
Two major issues have weighed on Porsche’s outlook:

Falling demand in China: Competition with local brands and slower spending by wealthy buyers hit sales hard. Some reports indicate deliveries fell up to 28%.

Electric vehicle rollout slower than planned: Porsche is investing heavily in EVs and batteries but has been slower to launch hits like the electric Macan SUV. Early models have also faced software delays and cost overruns.

How Porsche Is Responding

• To manage the downturn, Porsche announced several actions:
• Restructuring costs: The company is spending €200 million on reorganizing operations and €500 million on its EV and battery arm.
• Job changes: Over four years, Porsche plans to reduce staff by 1,900 roles, but it won’t force anyone to leave before 2030 thanks to an agreement with workers.
• Price increases in the U.S.: In July, Porsche raised U.S. prices between 2.3% and 3.6% to cushion the tariff blow.
• U.S. production plans: The company is exploring whether a U.S. factory would make sense under the new trade rules to avoid future duties.
• CEO Oliver Blume described the situation as a long storm. He warned that the industry face structural change and that improving results will take time.

Industry-Wide Pressures

• Porsche is far from alone in feeling the pressure:
• Volkswagen (its parent company) reported a €1.3 billion tariff loss, leading to lower profit expectations and tighter cost plans.
• Mercedes-Benz cut its profit margin forecast to 4–6%, citing €362 million in tariff costs and weaker demand in China.
• High-end brands like Aston Martin also blamed tariffs and Asia’s slowdown for canceling profit plans.
• Analysts say the broader auto industry may remain challenged until trade tension eases and EV adoption gains pace—now expected in 2026 or later.

Key Figures at a Glance

• Category    Details
• Tariff Cost (H1 2025)    €400 million
• Revised Operating Margin    5–7% (down from 6.5–8.5%)
• Second-Quarter Operating Profit    €154 million (–91%)
• Revenue Forecast    €37–38 billion (unchanged)
• Restructuring Spend    €200 million
• EV/Battery Investment    €500 million
• Job Cuts Planned    1,900 (with protections to 2030)
• U.S. Price Increase    2.3% to 3.6% in July
• China Sales Drop    Up to 28% decline reported

What It Means for Porsche

• Tariffs are painful: Without U.S. local production, Porsche faces full exposure to new duties.
• China slowdown hurts high-value brands: Foreign luxury automakers are losing ground in a competitive Chinese market.
• EV shift is expensive and slow: Porsche must balance old and new powertrains, all while funding new electric models.
• Big changes needed: Leadership is cutting jobs and reorganizing to stay competitive.
• Slow road ahead: Management expects conditions to improve gradually, possibly by 2026, as investments and restructuring pay off.

Porsche has issued a major warning for its 2025 profit outlook due to a perfect storm of global headwinds: hefty U.S. tariffs, weak China demand, and delayed gains in electric vehicles. Its operating profits have plummeted, and it is now navigating a deep restructuring plan. By raising prices, cutting costs, and exploring U.S. manufacturing, the company aims to stay afloat—but the road to recovery is likely long. Porsche expects market conditions to gradually stabilize by 2026—but patience and planning will be key.

U.S. tariffs