Porsche Plans 10% Job Cuts Amid 28% China Sales Plunge

Porsche, the iconic German luxury sports car manufacturer, is facing its most significant crisis in decades. The company's CEO, Oliver Blume, has warned the nearly 37,000-strong workforce that further cost cuts are necessary to navigate the challenging business environment. Porsche plans to eliminate more than a tenth of its staff by 2029, aiming to position the brand for a future where it sells only 250,000 cars annually, down from the 311,000 sold last year. The company is grappling with a combination of plunging demand in China and the economic impacts of Trump’s policies, which have hit the export-reliant luxury sports car maker hard.

In a letter to employees, Porsche announced that it would enter negotiations with the IG Metall trade union over a second package of cost cuts. These reductions are expected to come on top of the already planned 3,900 job cuts in Germany through 2029. The goal is to shrink the company’s cost base to reflect a world where the brand sells only 250,000 cars annually. Chief executive Oliver Blume, who also runs the majority owner Volkswagen Group, cautioned staff about the difficult times ahead. He stated that the business model that sustained Porsche for many decades is no longer functioning in its current form due to rapidly deteriorating business conditions.

Blume cited two major contributing factors: the plummeting demand in China and the slowdown in the adoption rate of electric vehicles (EVs). In China, first-half vehicle sales plunged 28% to their lowest level in eleven years amid a brutal price war, particularly for EVs. Porsche, which sold 95,700 cars in China in 2021, is now on pace to sell less than half that number this year. This slowdown in EV adoption has led Porsche to abandon its previous goal of achieving an 80% share of its volumes from fully-electric cars by 2030. The company now prefers not to give a forecast for EV sales, highlighting the significant impact on Porsche and its supplier base, given the investments already made in new products like the electric Macan.

Blume acknowledged the dual challenge of needing EVs to meet regional CO2 regulations while facing lower profit margins compared to combustion engine cars. He also highlighted the economic policies of the U.S. administration, which have sparked a sharp decline in the U.S. dollar versus the euro and imposed punitive tariffs. Despite record deliveries in the U.S. market, Porsche is under enormous financial pressure due to these factors. The company's operating margin is currently forecast to shrink to between 6.5% and 8.5% from 14.1% in 2024, a significant drop even from the dark days of the 2008-09 global financial crisis.

Porsche is also in the midst of overhauling half its senior management team, with four new C-suite executives taking charge of finances, sales & marketing, personnel, and procurement. The company confirmed the tenor of the letter but declined to comment further. As Porsche navigates this crisis, it remains to be seen how the company will adapt its business model to thrive in a rapidly changing global market.