Volkswagen announces dramatic action!
Porsche SE, the parent company of Volkswagen and Porsche AG, has announced a reduction in its annual profit target for 2025 due to a combination of factors including a 6.7% drop in revenue, a 67% decline in operating profit, and the impact of US import tariffs and weak demand in China.
The introduction of a 15% tariff on European imports to the US, effective August 1, has directly increased costs for Porsche, prompting price adjustments and cost-cutting measures such as planned job reductions (around 3,900 jobs) and production rebalancing to maintain margins. Additionally, demand for electric vehicles (EVs) in China has fallen sharply by 42%, where competitors dominate, contributing to sluggish sales in that key market.
These challenges are not limited to Porsche SE. Volkswagen, of which Porsche SE is a majority shareholder, is also impacted by the same difficult global economic conditions. The company faces higher U.S. tariffs, weak demand in China, and other supply chain risks, forcing it to prioritize restructuring and efficiency improvements while managing the transition to electrification.
Despite these setbacks, Porsche SE is responding with aggressive cost-cutting and a strategic realignment. The company aims to stabilize with a return on sales target of 5-7% in 2025. In the first six months, Porsche SE's adjusted earnings fell by 1 billion euros to 1.1 billion euros compared to the previous year. Including changes in the valuation of shares, net profit for Porsche SE plummeted from 2.1 billion euros to 0.3 billion euros in the same period.
The current net debt target for Porsche SE is 4.9 to 5.4 billion euros by the end of the year. The growing debt pile at Porsche SE is a consequence of the reduced earnings and net profit. The ongoing financial results of Porsche SE reflect the challenging situation in the automotive industry, with both Volkswagen and Porsche AG also facing similar challenges due to the difficult market conditions.
The sluggish economy, US tariffs, and weak demand in China are putting significant pressure on the automotive industry, with both Volkswagen and Porsche feeling the impact. The financial situation of Porsche SE remains under pressure due to the challenging market conditions. However, the company remains optimistic about the future, with plans to stabilize and navigate the complex mix of trade barriers, market shifts, and evolving consumer preferences in key regions like China and the US.
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