Volkswagen-owned Porsche is at the starting line of a major transition year.
The luxury carmaker warned this week its profitability will decline this year despite hiking its dividend on the back of a rise in 2023 operating profit.
The share price fell following the news but investors quickly regained confidence after accepting 2024 would be a year of transition, as Porsche launches a slew of new sport scars.
The German manufacturer’s most well-known and expensive model is currently the Porsche 911. Its operating profit rise in 2023 hinged on soaring demand for the vehicle, which has increased by 44 per cent since 2019.
Deliveries of the 911, which can cost as much as €292,200, increased more than any other Porsche model by nearly a quarter to over 50,000 units. It is responsible for around 30 per cent of the firm’s earnings despite making up under 15 per cent of deliveries, according to Bloomberg Intelligence.
But senior executives at Porsche understand this reliance can’t continue forever. Demand from Europe’s wealthiest has remained resilient in recent years but there are signs they may be beginning to feel the pinch from high interest rates.
Automotive analysts at HSBC admit “there is a degree of faith needed to buy the stock” at present. Yet despite the frustration of the lowered profit forecast, they say there is “reason to believe the trough on margins is near.”
Porsche, and by extension Volkswagen, are banking on the successful launch of a slew of new models this year to tackle their problems. These include upgrades to Porsche’s Panamera sedan and electric Taycan, as well as the new electric Macan SUV.
The 911 is also set for a glow-up and a hybrid version has been confirmed.
“Model changeover begins in earnest over the next nine months, leaving a largely refreshed (and young, at an average age of 1.5 years) line-up for 2025,” HSBC said.
“The risk as we see it is largely execution, which has been mixed, but we are comforted by management’s assertions that demand is strong.”
It’s anyone’s guess how the market will react to Porsche’s stock this year. It was a bumpy ride over the last 24 hours, with shares falling, then rising, then falling again this morning. Analysts are pretty certain 2024 will have its peaks and troughs, too.
Michael Tyndall, head of European automotive equity research at HSBC, said: “We expected a bumpy 2024 and that seems to be what management is projecting. Demand is not the concern, it is more a function of coincident launches and the associated phasing of production.
“Strong prospects in 2025 were mentioned many times, which begs the question – how tough will H1 be?”