Porsche AG has dramatically revised its 2025 profit outlook, forecasting a sharp drop in its profit margin due to the combined pressures of rising US tariffs, a decelerating transition to electric vehicles (EVs), and diminishing sales in key markets like China. The luxury automaker now expects its return on sales to fall to 6.5%, down from an earlier prediction of 10%, as it struggles to adapt to a rapidly shifting automotive landscape.

The consequences of tariffs in the US on the profitability of Porsche

The 25% US tariffs on imported vehicles have severely dampened Porsche’s profit forecasts. Without any domestic production facilities in the United States, Porsche’s reliance on European imports leaves it especially vulnerable to changes in trade policy. Citi analyst Harald Hendrikse estimates that the tariffs will increase the company’s costs by €2 billion annually. As reported by Porsche’s chief financial officer, Jochen Breckner,

the company has still not estimated the full-year impact but admits the tariffs will most likely deeply affect sales during the months of April and May.

Weak Electric Vehicle Adoption and Declining Sales in China

Besides the company’s tariff issues, Porsche is facing an overall decline in EV demand, especially in the Chinese market. The company’s sales in China dropped by 42% during the first quarter of 2025, marking its most miserable performance in the region since 2013. This loss is largely due to the expanding competition from BYD (a Chinese multinational company primarily operating in the automotive and renewable energy industries) and other domestic Chinese manufacturers that have made notable strides in EV technology. In response, Porsche has changed its product focus, putting less emphasis on expanding the EV range and shifting attention toward higher sales of combustion engine and plug-in hybrid vehicles. 

The roadmap for Porsche’s recovery

Porsche has now also slashed its 2025 revenue target to €37-38 billion, down from €39-40 billion. This shows that the focus on China and the US has been a pressure point for the company. The projected drop in profit margins from a previous range of 10-12% to 6.5-8.5% demonstrates a profound change in the financial outlook of Porsche, especially considering the decline in US market performance.

The company has indicated that it will continue to incur significant additional one-off costs, including a self-reported one this year, and assumes strategic re-evaluation as well as more complex modular challenges in the global economy. Regardless of these obstacles, Porsche is aiming to strengthen its position in the ultra-luxury segment of the market and is willing to increase the prices of its cars if the tariffs are sustained. Porsche will probably continue its focus on enhancing production efficiency and managing external factors like trade policies. However, whether the company will recover double-digit profit margins in the near term remains uncertain.