Does Porsche’s Setback Signal The End of German Supremacy In Autos?

Porsche AG shares fell almost 10% last week—the steepest drop since its 2022 debut—after the carmaker scaled back its electric-vehicle ambitions. The stock is down nearly 30% this year and will fall out of Germany’s benchmark DAX index. Parent company Volkswagen also slid 8.4%, its sharpest drop in more than two years, according to Bloomberg.

The 911 maker scrapped plans for a battery-powered luxury SUV and will instead expand its lineup of combustion-engine and hybrid cars. The shift triggered a €1.8 billion hit to operating profit, Porsche’s fourth profit warning this year, and pushed both Porsche and VW to cut their earnings outlooks. VW also flagged a €3 billion impairment tied to the move, lowering its forecast for operating return on sales to just 2% to 3%, down from as much as 5%.

Bloomberg writes that auto buyers “are putting little value on luxury electric cars,” said Matthias Schmidt, an independent analyst near Hamburg. “Porsche has now realized this and is jumping back into high-margin combustion-engine models.”

The setback underscores the wider struggles of Germany’s auto sector. Porsche faces weak demand in China, where local champion BYD dominates EVs, and has been hit hard by U.S. tariffs in its largest market. Luxury spending is muted, and analysts say Porsche has disappointed investors since its blockbuster listing. “Porsche has now been disappointing investors for over two years,” Citi’s Harald Hendrikse wrote. “It is hard to conclude that these disappointments have now completed.”

Volkswagen, once an EV frontrunner, is also scaling back battery plans and restructuring to cut costs. While VW outsold Tesla, Stellantis and BYD in Europe this year with several affordable EVs, its premium brands—Audi, Bentley, Lamborghini and Ducati—have weakened, with shipments falling across major markets.

Porsche has already replaced executives, scrapped its in-house battery program, and announced job cuts to reduce costs. But the crisis is fueling calls for CEO Oliver Blume—who leads both Porsche and VW—to step aside from running Porsche so a new leader can attempt a turnaround.