Shareholders also "force the palace" Porsche

Author: Yu Yan

Editor: Zhou Zhiyu

The failure of electrification transformation has made Porsche's allies restless.

Following the pressure from Porsche China's dealer partners, Porsche shareholders also questioned Porsche CEO Oliver Blume at the Porsche shareholders' meeting why he insisted on the target of electric vehicle sales accounting for more than half next year. One of Porsche's major institutional shareholders, DWS Investment GmbH, even stated that the decline in stock price is to some extent a reflection of Porsche's governance defects.

It's no wonder that investors are anxious. Porsche's stock price has been declining this year, down 14.4% from the beginning of the year, while Ferrari has risen by 23.52% during the same period. Porsche's stock price even directly broke through recently, hitting its lowest point since listing at 69.2 euros per share, still hovering around 70 euros per share. Compared to the peak in May last year, it has also dropped by 41%.

Investors believe that due to the slowdown in the global electric vehicle market and the low sales of Porsche electric models, this has already threatened the company's sales and profits. Therefore, some Porsche shareholders are calling for this luxury car manufacturer to slow down its electrification efforts.

The main reason for this call is that as Porsche reforms its product line, its sales in the Chinese market, which is the main market for electric vehicles, are poor, prices are falling, and there are also problems with component procurement, putting pressure on Porsche's stock price. Blume also summarized Porsche's situation in the Chinese market as "difficult".

Starting from 2022, Porsche's sales in China have declined for two consecutive years, contrasting sharply with the past few years of price surges. Especially from 2023 onwards, the decline has further expanded, with a 15% drop in sales for the whole year.

According to the financial report for the first quarter of this year, the situation in the Chinese market is even more severe. In the first quarter, Porsche sold 16,340 cars in China, a nearly 25% year-on-year decrease.

When sales are not maintained, price reduction becomes an inevitable path, and damage to brand value is also inevitable.

In May, dealers offered Taycan models for over 440,000 yuan, with analysts joking, "The depreciation speed of the Taycan is faster than that of the 911 sports car."

In the Chinese market, dealers facing heavy sales pressure have to subsidize consumers through price cuts to boost sales; Porsche China also chose to let dealers hold inventory to meet sales targets, further increasing the financial pressure on dealers, leading them to rise up and pressure Porsche.

Porsche responded: "The current automotive industry is undergoing unprecedented major changes, Porsche China and dealers are facing several complex issues together, with opportunities and challenges coexisting."

With pressure from dealers and declining sales, a series of chain reactions are taking place. Sales revenue in the first quarter was 8.1 billion euros, down 12.7% year-on-year; the gross profit margin for the automotive business was 23.4%, a 30.3% decrease from the same period last year.

Luxury brands have always prided themselves on their high profit margins and high-priced brand image, but now Porsche is accelerating its descent from the altar Previously, Porsche's electrification was seen as a new growth curve. However, the current sluggish demand for electric vehicles proves that the challenges ahead are clearly greater than the opportunities. Ingo Speich of investment company Deka Investment stated that consumers are more likely to resist Porsche's electric vehicles rather than purchase them.

In the wave of electrification, these traditional luxury brands had made aggressive statements about electrification, which had earned them good performance in the capital markets. When Porsche went public in 2022, electrification was an important narrative for them in the capital markets. At that time, as the largest IPO in the European market in recent years, its market value once exceeded that of BMW and Mercedes-Benz.

By 2023, Porsche announced that by 2025, the proportion of pure electric and plug-in hybrid models would account for over 50% of all new cars sold. By 2030, Porsche aims for pure electric models to account for over 80% of new car deliveries.

Due to a series of aggressive plans, Porsche's stock price had nearly reached 120 euros in May 2023, representing an increase of nearly 50% compared to its IPO, exciting the capital markets.

Over the past year, Porsche's electrification process has remained aggressive. Several representative models have further plans for electrification this year, and its iconic 911 model has also been equipped with an ultra-lightweight high-performance hybrid system. In theory, Porsche should continue its previous glory.

However, from the current sales figures, electrification cannot sustain Porsche's success. A clear data point is that the delivery volume of Porsche's flagship electric model Taycan in the first quarter was almost halved.

In the current Chinese market, many international luxury brands are facing challenges in maintaining brand value and sales. Electrification was once seen as a "lifesaver" for them to find growth, but now it has become a boomerang, hitting these brands' strategic adjustments and causing setbacks in the capital markets.

Traditional car manufacturers also need to make their own choices on how to balance their finances on the road to electrification transformation