Porsche braces for era of lower sales as it leans in to luxury

By Rachel More and Ilona Wissenbach

BERLIN/FRANKFURT, Oct 7 (Reuters) - Porsche is reshaping its business for a future with lower sales volumes, the sports car maker said on Wednesday, betting that a greater focus on high-end models will help restore its profit margins despite subdued demand.

The automaker, which like its parent Volkswagen is undergoing a major restructuring to address sluggish sales and high costs, said in its turnaround plan that it would lower its future break-even point to fewer than 200,000 units, well below last year's total deliveries of 279,449.

Porsche's global deliveries have already fallen by almost 10% since the year of its blockbuster listing in 2022, as plunging demand in China and tariffs imposed by the United States hit two of the brand's most important markets.

During a capital markets day at the company's development centre in Weissach, CEO Michael Leiters sought to assure investors that a focus on high-end sports cars such as the 911 would put the carmaker back on track, with ambitions to boost the selling prices of Porsche's top 10,000 vehicles.

"We want to reinforce Porsche as the world's most desirable sports car manufacturer," Leiters said, pitching a luxury shift to place the brand alongside the likes of Ferrari.

STEEP RETURN TO DOUBLE-DIGIT MARGINS

The CEO, who took over at the start of the year with the task of restructuring the company, said his strategy would focus on cutting costs for now.

Porsche is targeting a group operating margin of 15% in the long term, although it only just expects to return to double digits in the next five years or so, according to the mid-term outlook.

Porsche's profit margin collapsed last year to 1.1%, far below results in the high teens posted when it went public four years ago under Oliver Blume, Leiters' predecessor, who remains CEO of parent Volkswagen.

The strategy update gave shares an initial boost of up to 5% but they later reversed, trading 1.2% lower by 1419 GMT.

RETREAT FROM CHINA

Finance chief Jochen Breckner said sales volumes are expected to remain in line with levels seen last year in the medium term, even with collapsing volumes in China.

Once Porsche's main growth engine, that market is expected to make up less than 10% of global sales in the coming years, down from 35% at the start of the decade.

"A recovery in China is not in our plan right now," Leiters said.

Porsche is cutting 9,000 positions by 2035, reducing its total workforce by a fifth, as job losses mount in the German automotive industry under pressure from low-cost Chinese rivals.

Alongside existing redundancy programmes and a plan to cut management positions by 40%, Leiters said lower development and sales costs would make the company more robust.

The company also wants to intensify platform-sharing with fellow Volkswagen brand Audi to save money.

(Reporting by Rachel More and Ilona Wissenbach; Editing by Tomasz Janowski and Jan Harvey)