Porsche is facing significant challenges in the Chinese market, prompting the automaker to reduce its dealership network due to weak demand. Chief Financial Officer Lutz Meschke announced that the company aims to achieve billions in cost cuts by 2030, reflecting a broader trend of declining sales in the luxury sector. In the third quarter of 2024, Porsche reported a 41% drop in operating profit, falling to 974 million euros, which was below analyst expectations. Vehicle sales are projected to decline to around 250,000 annually, down from over 300,000, indicating a structural shift in demand within China. Meschke has also predicted stagnation in vehicle sales for 2025, further complicating the outlook for luxury automakers. Despite these challenges, Porsche has maintained its sales outlook for 2024, expecting revenues between 39-40 billion euros with an operating margin of 14%-15%.
This situation mirrors the broader struggles faced by the luxury market in China, where brands like LVMH and Burberry have reported significant losses. The European luxury market has lost approximately US$240 billion in market value as wealthy Chinese consumers tighten their spending. LVMH experienced a 16% decline in sales in Asia, excluding Japan, for the third quarter of 2024, while Burberry's market value has dropped by 70% over the past year. Analysts, including UBS's Zuzanna Pusz, have suggested a 'slower for longer' outlook for the luxury sector, indicating that the current economic climate may persist.
April Zhang from the South China Morning Post notes that international luxury brands are struggling due to various factors, including a troubled housing market and a crackdown on social media flaunting. Many consumers, like Liu Fang, have drastically reduced their luxury spending, which has been attributed to economic uncertainty. Richard Lin from SPDB International emphasizes that consumer spending will not rebound without improvements in wealth and job security. Despite the downturn, some analysts see potential investment opportunities in high-end brands, suggesting that there may still be prospects for growth in the sector. Additionally, Chinese authorities have announced a monetary stimulus package aimed at boosting consumer confidence, although skepticism about economic recovery remains prevalent among consumers. [f92be408][814abe7f][eaec0cb9][d04c2262]