Earlier today, shares of Porsche AG in Germany plunged the most on record after the struggling sports car maker announced it would scale back its electric vehicle (EV) rollout. Porsche scrapped plans for a future battery-powered luxury SUV and shifted focus back to petrol-powered engines and hybrid models. This move will result in a $2.1 billion hit to operating profit and force both Porsche and its parent, Volkswagen AG, to revise their full-year forecasts.
"Markets are led lower by Autos, STOXX Europe 600 Automobiles & Parts Index [SXAP] is down 2.8%, following the two profit warnings from Porsche and Volkswagen after the close on Friday. Porsche AG is down 7.8% and Volkswagen is down 8%," UBS analyst Marisa Vethanayagam wrote in a client update earlier.
Friday's profit warning marked the fourth time this year that Porsche cut guidance, with shares down 28% year-to-date. The slump has pushed the automaker so low that it is now set to be removed from the DAX, Germany's benchmark index.
Porsche's mounting troubles - compounded by muted EV sales in key markets and intensifying competition from Chinese automakers - are increasingly weighing on its parent, Volkswagen. On Friday, Volkswagen warned it would take a $3.5 billion non-cash impairment tied to Porsche's hit to operating profit and lowered its forecast for operating return on sales this year to 2% to 3%, down from 5%.
Besides Porsche and Volkswagen, other European peers, such as Stellantis NV and Renault SA, are also struggling with dismal EV demand after they invested billions of dollars in the technology.
Industry-wide across the continent, the MSCI Europe Autos Index is down 6% year-to-date, hovering on a fine line of support around 160 euros.
Here's commentary from top Wall Street research desks on Porsche scaling back its EV unit, resulting in a guidance cut and dragging down peers across the continent (courtesy of Bloomberg):
RBC (Sector perform, PT EU43)
Revisions underline significant near-term pressures, with EV platform delays and a pivot toward hybrids and combustion drivetrains signaling challenges in electrification strategy, analyst Tom Narayan writes
Updated 2025 guidance shows sharp profitability deterioration
Medium-term targets at the lower end of historical profitability further raise concerns about Porsche's ability to compete effectively in the premium EV and luxury space amid intensifying competition
Jefferies (hold, PT EU40)
Re-basing of guidance may be the last, but leaves the turnaround a drawn-out affair with product cycle and brand challenges, according to analyst Philippe Houchois
Besides Porsche impact, VW's guidance delays cash conversion again
Cuts Porsche price target to €40 from €47
Citi (buy, PT EU58)
Exceptional charges take FY25 Ebit margin guidance down from 5%-7% to between 0% and 2%, a superficial and unacceptable level of margin for the Porsche brand, analyst Harald Hendrikse writes
Management reiterated this would be the last such re- statement, but investors have heard this story before and will remain skeptical until Porsche stops delivering negative surprises
Shares likely to remain subdued as they have been
Matthias Schmidt, an independent auto analyst based near Hamburg, told Bloomberg that auto buyers "are putting little value on luxury electric cars," adding, "Porsche has now realized this and is jumping back into high-margin combustion-engine models."
Related:
Not surprising...
. . .