Volkswagen, profit warning: Porsche weighs 5.1 billion on operating profit

Porsche's electric strategy has come to an abrupt halt and is dragging the Volkswagen Group's accounts down with it. The Stuttgart-based manufacturer has decided to fundamentally review its plan to launch new battery-powered models, slowing down investment and reshaping its offer towards traditional and hybrid engines. This decision came after months of below-expected sales - especially in China - and competitive pressure on prices, which eroded margins.

The backlash on the numbers, after the already painful mid-year turnaround, is heavy. Volkswagen, which owns around 75 per cent of Porsche AG, has announced that the subsidiary's product overhaul will generate a total impact of EUR 5.1 billion on its 2025 operating profit. In detail, the Wolfsburg-based group, Europe's number one carmaker, will recognise a non-cash impairment of around EUR 3 billion related to the abandonment, in its original configuration, of a project jointly developed with Porsche. Added to this is a one-off negative effect of 2.1 billion resulting from the deterioration of the forecasts of the manufacturer of the iconic 911.

The consequences for the financial targets? Volkswagen's operating return on sales is now estimated at 2 to 3 per cent for the financial year 2025, compared to 4 to 5 per cent previously indicated. The Automotive division's net cash flow has been revised to zero, compared to the 1-3 billion range; net cash will fall to around 30 billion (from 31-33), while revenue is expected to remain stable at the previous year's level.

For Porsche, the immediate impact is a cut in prospects (fourth this year): the operating margin for 2025 will not exceed 2 per cent (from 5-7 per cent previously), with an estimated loss of up to EUR 1.8 billion linked to the postponement of several electric projects. In fact, the launch of a new range of suvs 'beyond' the current Cayenne, initially conceived only with battery power, will be postponed. The production cycle of the current combustion and plug-in models will also be extended. In addition, at the end of August, with the reconversion of Cellforce to research and development, the plan to manufacture battery cells in-house was shelved.

The turnaround comes at a delicate time for the industry. After years of massive investment in the green transition, the European automotive industry is reckoning with an electric car market that is growing far below expectations, due to macroeconomic uncertainty, cost pressures and increasingly fierce competition from China. Since its debut on the stock exchange three years ago, Porsche's share has lost almost half its value and will exit the Dax index in Frankfurt on 22 September, following the index's periodic rebalancing.