Porsche AG is undergoing significant changes as senior executives face possible departures amid declining sales and profit margins. CEO Oliver Blume must navigate these challenges, particularly in China, where sales dropped nearly 30%. Despite a slight sales increase in North America, potential U.S. tariffs pose risks. The situation raises questions about the effectiveness of Porsche’s expanded dealer network and the dual CEO roles. The VW Group is also grappling with broader issues affecting multiple brands, compounded by weak performance in China.
Major Changes Loom at Porsche AG
Recent developments at Porsche AG have sparked significant upheaval within the luxury brand of the Volkswagen Group. Over the weekend, it was announced that two senior executives, Lutz Meschke, the board member in charge of IT and finance, and Detlev von Platen, the sales chief, are facing potential exits from their positions. Wolfgang Porsche, the chairman of the supervisory board, is reportedly in discussions with both executives regarding a “mutual early departure” from the Porsche board, as revealed by the company based in Stuttgart.
Challenges and Market Struggles
This internal power struggle has escalated into a larger managerial crisis, compounded by notable operational difficulties, including declining profit margins and a downturn in sales in key markets. Oliver Blume, who serves as the CEO for both Volkswagen and Porsche, now finds himself tasked with addressing yet another challenge within the VW Group.
Despite a relatively solid performance in 2024, largely attributed to a generational shift in several model lines—including the Panamera, Taycan, 911, and Macan—Porsche’s results fell short of expectations. The brand recorded sales of just under 311,000 vehicles, slightly below the previous year’s figures. Particularly concerning is the performance in China, which is the third-largest market for Porsche after Europe and North America, where sales unexpectedly dropped by almost 30 percent in 2024. In 2021, the brand sold nearly 100,000 vehicles in China, but last year, that number dwindled to just 57,000.
This decline in sales was a significant factor prompting the company to issue a profit warning in mid-last year. The anticipated margin for 2024 has now been adjusted to between 14 and 15 percent, down from the earlier forecast of 15 to 17 percent. Similar to other brands within the VW Group, sluggish sales of electric vehicles are largely to blame, especially in the Chinese market. The fully electric Taycan saw its sales halve last year, primarily due to increased competition in the luxury segment.
New entrants like Xiaomi have made waves in the electric vehicle market, launching products such as the SU7, which closely resembles the Taycan but is priced significantly lower. In November alone, Xiaomi sold 23,000 cars, while Porsche’s Taycan managed only around 130. The economic downturn in China is contributing to the overall market weakness.
As the situation unfolds, industry analysts are questioning the necessity and effectiveness of Porsche’s expanded dealer network in China, raising concerns that investments may not have yielded the expected returns. Reports suggest that sales chief von Platen may have recognized the challenges too late and failed to adequately alert the board. Additionally, social media comments from his partner, a young influencer, have caused internal chatter within the company.
In North America, Porsche has managed to stabilize its sales, achieving a slight 1 percent increase. However, potential tariff threats from the U.S. government could pose significant risks to the brand, as neither Porsche nor Audi has production facilities in the United States, making them vulnerable to external pressures.
Currently, discussions are underway within the VW Group regarding the establishment of a joint manufacturing plant for Audi and Porsche in the U.S., although such plans would take considerable time to materialize.
After serving on the Porsche board since 2009 and as deputy chairman since 2015, finance chief Lutz Meschke appears to have overreached in his pursuit of increased influence. While he and Blume were perceived as a strong leadership duo, Blume’s insistence on maintaining dual CEO roles for both Volkswagen and Porsche complicates Meschke’s ambitions.
As the VW Group CEO, Oliver Blume is now faced with the dual challenge and opportunity of reshaping the leadership team at Porsche. However, it remains uncertain how long he intends to juggle both roles. Investors and shareholder advocates have long expressed their concerns over this dual responsibility, while Blume himself views it as beneficial for maintaining close ties to operational activities.
The challenges facing the VW Group are mounting, with crises at both the core VW brand and Audi, alongside the current turmoil at Porsche. The root of these issues largely stems from weak business performance in China. Should tensions escalate into a trade war between the U.S. and the EU, the outlook for the group and its individual brands could deteriorate further. Investors are closely monitoring whether Blume will revise the targets for 2025 and beyond during the upcoming balance press conferences.