German luxury carmaker Porsche is facing a challenging financial year. The company announced a significant decline in profitability and blamed its electric vehicle (EV) strategy for this decline. Consequently, Porsche has suspended its plans to transition to electric vehicles.

Porsche is experiencing a decline in profitability

Porsche’s financial reports clearly illustrate the company’s current predicament. After generating a profit of €974 million in the third quarter of last year, the company announced a loss of $967 million in the same period this year. And this decline wasn’t limited to just the final quarter. The company’s total profit for the first three quarters of the year was only €40 million.

This figure represents a massive 99% drop compared to the €4 billion Porsche expected to generate in the first three quarters of 2024. This decline came as a major surprise for Porsche, normally one of the Volkswagen Group’s most reliable sources of revenue.

One of the main reasons for the company’s significant decline was the failure of its electric car models, on which it had pinned its high hopes, to meet the expected demand. Following this crisis, the company decided to suspend its plans to transition to electric cars.

According to the latest information, Porsche has shelved its new electric-hybrid model project. Instead, the company has opted to focus on conventional carbon-fueled models. Porsche promised its investors that 2026 would be much better.

Another key reason for Porsche’s difficulties is the shifting balance of power in the Chinese market. While domestic car manufacturers have been rapidly increasing their market share in China recently, the share of foreign companies like Porsche is declining rapidly.

Porsche sales in China have fallen by 26 percent this year, and this decline is expected to continue in the coming period. This loss in a crucial market for the company has negatively impacted Porsche’s financial figures.

Porsche, struggling with factors such as the failure of its electric car project to achieve the expected impact and its declining market share in China, appears unlikely to reverse this deteriorating trend. Former McLaren CEO Michael Leiters, who will take over as CEO at the beginning of next year, faces a challenging task.