According to media reports, Porsche's first-quarter profit saw a significant decline, marking its worst performance since going public in September 2022. Model updates and weak demand in the Chinese market have put pressure on the company's prospects.
Porsche announced on April 26th that its operating profit for the first quarter dropped by 30% year-on-year to €1.28 billion (approximately $1.4 billion), while its first-quarter sales amounted to €9.01 billion, surpassing the expected €8.77 billion. The downturn in Chinese consumer demand has had a significant impact on the company. Additionally, Porsche had anticipated a potential sales slump earlier this year due to upcoming updates to four models.
Lutz Meschke, Porsche's Chief Financial Officer, stated during a media conference call that while orders for this year are nearly saturated, the introduction of new models like the electric Macan and 911 in the coming months will affect production volume and profit. He mentioned that the company anticipates a "strong acceleration" in profitability by 2025.
Porsche's return on sales for the first quarter dropped to 14.2%, below the company's annual guidance target and analysts' expectations. However, Porsche remains committed to its full-year guidance, including an anticipated group revenue of up to €42 billion.
Apart from investment in new model development, Porsche has also invested heavily in vehicle technology and driving experience. Meschke stated that the brand expects its profit margin to return to a normal level of 17% to 19% by 2025.
While luxury car manufacturers like Porsche are generally less affected by economic downturns, consumer demand in the Chinese market has weakened. Meschke expects to see "some degree" of recovery in the Chinese market in the second half of the year.
Porsche's deliveries in China, its largest market, declined by 24% in the first quarter to 16,340 vehicles, representing slightly over one-fifth of Porsche's global sales volume.
Bernstein analyst Stephen Reitman wrote in a pre-earnings note, "We need to see more evidence that management can control what they can control and stabilize the brand's position in China to some extent."
Meschke attended the Beijing Auto Show this week, where local companies like BYD, a leader in electric vehicles in China, showcased their latest technological advancements.
