Porsche alters course, causing Volkswagen billions in losses

Volkswagen faces losses exceeding €5 billion after Porsche decided to postpone the full electrification of its lineup. This move has impacted the plans of the VAG Group, the majority owner of the brand, according to Automotive News.

Porsche Strategy: Combustion and Hybrid Engines Alongside Electric

Porsche recently announced changes to its medium- and long-term launch strategy. The German manufacturer will continue investing in electric vehicles but will also increase focus on combustion and hybrid engines. An example is a large crossover that will be available with both electric propulsion and hybrid combustion engines.

This summer, Porsche confirmed that the next Macan will also be offered with traditional engines, despite the initial plan to eliminate piston engine versions in the European market. Meanwhile, the 718 sports models, Cayman and Boxster, will remain fully electric.

Oliver Blume, CEO of Porsche and the entire group, highlighted the declining interest in electric vehicles in certain markets, stating: “We have made important strategic decisions, and now we need to get to work. It will be a long and difficult road and will require all our effort and focus.”

The German executive noted that recalibrating Porsche’s plans will directly impact Volkswagen and expressed hope that the European Union will show flexibility regarding the ban on combustion engines by 2035. Following recent negotiations between manufacturers and the European Commission, Brussels authorities have agreed to accelerate the review of environmental targets. The EC will decide by the end of this year whether to postpone the sale of new petrol and diesel cars, a decision initially expected in 2026.

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The Future of Porsche’s Portfolio

Although Porsche’s decision caused losses of €5.1 billion for Volkswagen, the brand is not abandoning EVs. Development plans now also include hybrid models. A large SUV, positioned above the Cayenne, will be launched with FHEV and PHEV hybrid propulsion. The Panamera and Cayenne will continue to be produced in ICE versions even after 2030. A new electric platform has been postponed to the next decade.

Strategic changes will reduce Porsche’s operating profit by up to €1.8 billion in 2025. The VAG Group’s projected profit margin drops to 2–3%, compared to the previously expected 5%, while Porsche may record a margin below 2%, far below the initially anticipated 5–7% for 2025. This is the fourth consecutive downward revision of the profit margin forecast, and the medium-term projection has decreased to 15% from the previous 17%.

A UBS analyst commented that “these are not the margins you would expect for a luxury product, at least not a successful one.” A German trader noted that Porsche’s move was inevitable, as the brand had become “too focused on” or “dependent” on EVs.

Impact on the Labor Market and Tariffs

Earlier this year, Porsche announced the reduction of 1,900 employees in Germany, representing 15% of its workforce, due to lower demand in the United States and China. The U.S. administration imposed tariffs on European cars, directly affecting Porsche’s business since the brand does not manufacture any models in the U.S.

Volkswagen, however, is preparing major investments in the United States, which will also support the Porsche brand. While negotiations between the EU and the U.S. continue, the European Commission agreed to keep tariffs at 15%, down from the initially proposed 27.5%, but still far above the 2.5% level during the Biden administration.

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