Porsche AG has reported its nine-month results in line with its annual forecast, but the luxury sector is grappling with higher costs and subdued consumer confidence due to rising interest rates. While the luxury carmaker has improved its supply chain with reduced inventories, it continues to face elevated costs, primarily due to high inflation and substantial investments in new product lines set to launch in 2024. According to Chief Financial Officer Lutz Meschke, governments’ significant interest rate hikes have made customers hesitant to invest in new products.
This caution in the luxury sector mirrors concerns expressed by Tesla CEO Elon Musk, who worries that higher borrowing costs could affect potential customers’ ability to afford electric vehicles, despite price reductions. Other major automakers have also adopted a more cautious approach due to rising inflation and economic uncertainty, impacting quarterly sales of prominent brands such as LVMH and Kering.
Porsche’s CFO, Meschke, acknowledges the challenges faced by the entire economy, including the luxury industry. He notes that the impact can be seen in the share price performance of luxury retailers worldwide. Porsche’s share price remained unchanged from the previous day’s close after the release of the results.
Despite a confident start following its public listing in September, the company has adopted a more cautious tone and adjusted expectations in recent quarterly calls. This shift in sentiment is reflected in a share price decline from a peak of 120.3 euros in May.
Porsche is set to launch new models, including the Panamera, Taycan, e-Macan, and a new sports car generation in the coming year. The company has invested 2 billion euros ($2.12 billion) in research and development in the first nine months of 2023, the highest for a nine-month period in its history. Similar to other automakers, Porsche is facing challenges in the Chinese market, with deliveries down by 12% year-to-date. To strengthen its brand presence in electric cars, the company is exploring strategies, including opening community centres for customers.
Despite these challenges, Porsche reported an 18.3% return on sales, with an operating profit increase of 9% to 5.5 billion euros for the first nine months of the year. The company’s 2023 forecast anticipates a 17-19% return on sales, with revenues ranging from 40 billion to 42 billion euros, demonstrating its confidence in the resilience of luxury demand, even amid high inflation and global economic uncertainty.
Porsche’s all-electric Taycan sports car has shown a recovery in deliveries, growing by 11% to 27,885 units, indicating progress in overcoming supply chain challenges that had affected battery-electric vehicle deliveries in the first half of the year.
