Porsche Prepares for Further Cost Cuts Amid Sales Decline

Porsche has advised its employees to brace for further cost-cutting measures as the luxury car manufacturer seeks ways to offset losses from declining sales in the Chinese market and rising tariffs in the U.S. According to a memorandum obtained by Bloomberg, Porsche CEO Oliver Blume stated that the company will begin negotiations in the second half of this year with labor representatives to discuss cost reduction strategies, aiming to enhance Porsche's profitability in the coming years. The company's mid-term goal is to increase its operating profit margin from 8.6% in the first quarter to between 15% and 17%. Porsche's management is fulfilling its commitment to seek additional cost-cutting measures following layoffs earlier this year. Blume noted, "Our business model has worked effectively for decades, but it can no longer operate in its current form." The challenges facing Porsche include lower-than-expected demand for electric vehicles and sluggish car sales in the Chinese luxury car market. In China, competition in the electric vehicle market is fierce, and in Porsche's largest single market, the U.S., tariffs imposed by former President Donald Trump are impacting the company's profit margins. Blume remarked, "The impact on us is significant, greater than for many other automakers." Earlier this month, Porsche warned that this year's sales performance would be fraught with difficulties due to a slowdown in the U.S. market and continued poor performance in China. In the first half of this year, Porsche's global car sales fell 6% year-on-year to 146,391 units. Deliveries in North America rose 10% year-on-year to 43,577 units, mainly due to increased product supply and a price protection policy implemented in response to higher import tariffs; however, sales in its home market of Germany plummeted 23% year-on-year to 15,973 units, while deliveries in China dropped 28% to 21,302 vehicles. Porsche is following the lead of its parent company Volkswagen Group in trying to reduce production costs in Germany, where labor and energy costs are high. Volkswagen reached an agreement with unions late last year to cut production capacity and lay off 35,000 workers over the next five years.