The strategic retreat highlights the growing predicament facing the prestigious automotive brand, which is grappling with simultaneous challenges across two of its most vital markets: pricing wars in China and protectionist barriers in America.

Europe's automotive giant, Volkswagen, revealed it would shoulder a staggering R92 billion blow from sweeping changes to its product portfolio at the majority-owned subsidiary, shifting focus from electric vehicles back to hybrid and traditional combustion engines.

The dramatic U-turn marks a watershed moment for the maker of the celebrated 911 sports car, with Porsche warning that operating earnings could plummet by up to R32.4 billion over the current year.

Electric Dreams Deferred

Speaking to financial analysts and media representatives, Oliver Blume, who holds the dual role of chief executive at both Porsche and Volkswagen, acknowledged the sector's turbulent conditions, highlighting a pronounced cooling off in luxury electric vehicle sales.

"The entire automotive sector is experiencing unprecedented disruption," Blume remarked. "Having made these fundamental strategic choices, we must now execute them decisively. The path ahead will be arduous and lengthy, demanding unwavering commitment and substantial resources."

Market sentiment reflected the uncertainty, with Porsche shares dropping 3.1% by 1819 GMT and Volkswagen stock falling 2.1%.

The company has confirmed delays to multiple fully electric model launches, with its upcoming large SUV, positioned as a flagship above the existing Cayenne, now set to debut exclusively with conventional and hybrid powertrains rather than battery-electric options.

Profitability Outlook Dims

The strategic pivot has prompted Porsche to drastically revise its financial projections, with 2025 profit margins now capped at just 2%, a precipitous fall from previous estimates of 5-7%. Medium-term margin expectations have similarly been trimmed to a maximum of 15%, down from the 15-17% bracket.

An analyst, Patrick Hummel, from the multinational investment bank and financial services firm, UBS, expressed concern about the revised figures during the briefing: "Such margins are hardly befitting of a premium luxury marque, certainly not one with aspirations of market leadership."

Blume disclosed that several existing model lines powered by internal combustion engines and hybrid technology, notably the Panamera saloon, would see their production cycles extended through the 2030s.

The executive voiced optimism that European Union policymakers might adopt a more pragmatic approach to the bloc's aggressive 2035 deadline for eliminating CO₂ emissions from new passenger vehicles and commercial vans.

Both Porsche SE, the investment vehicle that serves as Volkswagen's controlling shareholder while holding a 12.1% direct stake in Porsche AG, and Volkswagen itself have downgraded their respective earnings forecasts, with the latter trimming profit margin guidance to 2-3% from 4-5%.

Transatlantic Trade Tensions Persist

On international trade matters, Blume suggested that anticipated cuts to US automotive import duties, potentially reducing levies from 27.5% to 15%, remained weeks away as diplomatic negotiations between European and American officials continue.

The Volkswagen Group is understood to be exploring potential investment commitments with US authorities, discussions that may encompass Porsche operations, though specific details remain confidential.