Luxury automaker Porsche reverses EV strategy amid weak China demand

Porsche is pulling back from its electric vehicle plans, thanks to weak demand in China amid a frenzy in a crowded market that has erased almost two-thirds of its stock value since May 2023. The luxury carmaker is cutting investment in battery-powered models and redirecting funds toward petrol and hybrid engines, according to the Financial Times . The change will be led by Michael Leiters, who takes over as Porsche’s new chief executive in January. Leiters has never been shy about his doubts over electric cars. “The technology isn’t ready,” he told the Financial Times last year while still running McLaren. He argued that EVs don’t offer the emotional thrill of traditional engines and lose value much faster. Leiters began his career at Porsche two decades ago as an assistant to a former CEO before moving to Ferrari as chief technology officer and then to McLaren as its top executive. Now he’s returning to the company that trained him, with the task of undoing years of overly ambitious electric planning. Leiters takes charge as Porsche faces pressure in China and the U.S. Leiters replaces Oliver Blume, who managed Porsche while also running Volkswagen. That dual role looked efficient when profits were strong, but after a series of warnings this year, it’s clear the brand needs a full-time leader. Automotive analyst Stephen Reitman from Bernstein said Porsche cut its 2025 operating margin forecast from 14 percent to just 0–2 percent. The company still targets 10–15 percent in the midterm, but Reitman warned it will “take some time before we even get to that.” The brand’s biggest problem is China. Sales there, once a key growth engine, have plunged nearly 40 percent since 2022 as local carmakers flooded the luxury EV segment. The U.S. market hasn’t been kinder. New tariffs introduced by President Donald Trump will now hit every Porsche vehicle imported from Europe, since the company has no American factories. That extra cost threatens to squeeze profits even further, worsening its dependence on Europe and shrinking global margins. Inside its factories, the pain is already visible. Porsche confirmed earlier this year that it will cut 3,900 jobs — about 9 percent of its workforce — by 2029. Talks with labor unions are ongoing as it seeks more cost reductions. On the technology side, Sajjad Khan, board member for IT and software, said the company is fixing persistent EV delays caused by software problems. “We have to work hard to execute perfectly,” Khan said, adding that improvements in quality and reliability should arrive by 2026 or 2027. Porsche cancels new SUV and revives gas engines amid restructuring As part of the overhaul, Porsche has canceled its upcoming all-electric SUV and booked an impairment charge of €1.8 billion for related development costs. It’s also reversing a previous decision to stop building petrol or hybrid versions of its top sellers, the Macan and Cayman. Analysts see this as an admission that the EV rollout under Blume went too far. Metzler Research analyst Pal Skirta said Porsche had been “too bullish” on electrification after the Dieselgate scandal and is now paying for it. Even with sales accounting for just 3.6 percent of Volkswagen’s total deliveries over the past three years, Porsche generated nearly 30 percent of the parent group’s operating profit. That made it one of VW’s most valuable divisions. But the collapse in demand, combined with software delays and China losses, has damaged that reputation. Leiters now faces the hard job of keeping Porsche’s high-end status intact while boosting output.His old company, Ferrari, thrives on limited production and exclusivity, a model Porsche can’t easily copy while chasing growth. And while this renewed focus on fuel engines might help short-term profits, it risks putting the company behind in the electric race again. Skirta warned that “they will focus again too much on combustion engine vehicles, and then we’ll lose the EV race in the long run.” Sign up to Bybit and start trading with $30,050 in welcome gifts