Porsche shares fall sharply after the company announced that development costs for new internal combustion engine models will reduce profit margins in 2025

New internal combustion engine and plug-in hybrid models to be launched

On Friday, February 7, 2025, Porsche AG's stock price fell by 71 TP1T. This is the largest drop among European companies, and of course the worst drop for Porsche AG since it went public.

The reason why Porsche shares fell so suddenly was because the previous day Porsche announced provisional figures for the full year 2024 and key forecast figures for the 2025 fiscal year, which stated that "the costs of new models and battery-related expenses will put pressure on profits in 2025, with profit margins this year expected to be just 10-121 TP1T."

This figure was well below the medium-term target of 17-191 TP1T, and even below the figure of 14.81 TP1T that analysts had predicted, so investors were suddenly taken aback.

Porsche has announced that the launch of new internal combustion engine and plug-in hybrid vehicles will take an 800 million euro ($1.2 billion) hit to profits.

In other words, this means that Porsche will spend 800 million euros to develop a new internal combustion engine and plug-in hybrid model (of course, this does not just mean 800 million euros for development costs, but also includes various other costs).

So, first let's take a look at what Porsche announced on February 6, 2025. Here is the announcement from Porsche's official website:

Provisional figures for full year 2024 and key forecast figures for fiscal year 2025

• Plans for short and medium term profitability enhancement measures:
  • Expanded product portfolio with additional internal combustion engine and plug-in hybrid models
  • Expansion of special edition vehicles and dedicated workshops
  • Adjusting business structure
• In particular, costs related to vehicle development and battery-related activities at our subsidiaries will result in significant additional expenditures.
• In fiscal year 2025, all these measures are expected to have a combined impact of approximately EUR 800 million on operating profit and net cash flow in the Automotive division.

• Taking into account the downward revision of our fiscal year 2025 revenue guidance due to the aforementioned expenses and costs, as well as market forces, we now expect our fiscal year 2025 results to be as follows:
  • Turnover: €39-40 billion
  • Profit margin on sales: 10-12%
  • Automotive net cash flow margin: 7-9%

• Based on preliminary, unaudited figures, Porsche forecasts the following key performance indicators for 2024:
  • Automotive division net cash flow margin is approximately 101 TP1T (forecast: 7-8.51 TP1T)
  • Profit margins are at the lower end of the forecast range.
  • Other key performance indicators are not significantly out of line with expected ranges
• Automotive net cash flow margin for 2024 takes into account inventory reductions in the fourth quarter and favorable special items at the end of the year
• Also taken into account is a cash outflow of €250 million related to the funding of pension plans through external plan assets.

• Based on the 2024 financial results and plans for the current fiscal year, the Executive Board plans to propose to the Annual General Meeting a dividend roughly at the previous year's level, subject to final approval by the Supervisory Board.
• The 2024 Annual Report and Sustainability Report (including final 2024 financial figures and a full report on projected developments for 2025) are scheduled to be published on March 12, 2025.
• Definitions of these key figures can be found in the 2023 Annual Report and Sustainability Report starting on page 184:https://investorrelations.porsche.com/en/financial-figures/

The above is the announcement from Porsche AG.

Porsche has reportedly become the first automaker to pivot to internal combustion engines amid sluggish demand for EVs in Europe and competition from local manufacturers in China, but analysts at Deutsche Bank say they see this as "P911's final chance to prove it can turn the business around before it further loses the confidence of long-term shareholders."

A little while agoThere are rumors that the head of finance and sales may be replaced.There were also some issues, so things seem quite unstable.

We will first await the full report on projected developments for fiscal year 2025, which will be released on March 12, 2025.

Source:
◆(Official)Latest news from Porsche AG
◆Porsche shares tumble as carmaker warns cost of new models to dent 2025 margins

Related article:Porsche (AG) may have a new head of finance and sales. What's happening at Porsche?

Rika (911supercars.com)

I'm Rika, the author of this article. Ever since Porsche 911 became my favorite car, I've become totally addicted to Porsche, and I can't stop loving Porsche, so I started this blog. My favorite cars are 911 Carrera (991.2), 911 Carrera Cabriolet (992.1), and 911 Carrera T (992.1).