Recently, some media outlets reported that Porsche had initiated staff layoffs in China, involving a 10% reduction in permanent staff and a 30% cut in outsourced personnel, with severance packages adhering to the N+6 standard. However, Porsche swiftly refuted these claims, asserting that the reports of layoffs in China were false and that the adjustments were part of an internal restructuring aimed at optimizing organizational efficiency and cost management across various departments and projects.

Regardless of the truth behind the layoffs, Porsche's operational outlook remains unpromising. In the first three quarters of this year, Porsche's operating revenue declined by 5% year-on-year to €28.56 billion, with operating profit dropping 27% to €4.04 billion. Net cash flow from automotive operations fell by 63% to €1.24 billion, and the return on sales operations was 14.1%, down from 18.3% in the same period last year. Sales also witnessed a notable decline, with Porsche selling 43,300 new vehicles in the Chinese market, a year-on-year decrease of 28.75%, making it the company's largest market with the most significant drop.

Not long ago, Pan Lichi, President of Porsche China, publicly announced plans to reduce the number of Porsche sales outlets in China from approximately 150 in January 2024 to around 100 by 2026. Statistics reveal that the average return on investment for Porsche's dealer network has plummeted from 5.5% in 2022 to 1.9% in the first ten months of this year. Some dealers are struggling to keep pace with market demands, necessitating adjustments to the dealer channel. The fact that Porsche, once "impossible to buy even at a premium," is now finding it "difficult to sell even at a discount," underscores the sales slump. To meet sales targets amidst declining sales, Porsche China pressured dealers to clear inventory, intensifying conflicts between manufacturers and dealers, which ultimately triggered a rebellion among dealers. Although both parties have since reconciled, this incident highlights the challenges faced by traditional luxury brands, led by Porsche.

Indeed, Porsche's shrinking performance in China mirrors the broader trends among traditional luxury automakers in the region. According to data from the China Passenger Car Association, the retail share of luxury brands in November accounted for 10.9%, a year-on-year decrease of 2.2 percentage points, with a notable decline in the retail share of the traditional luxury market. Specifically, BMW and Mercedes-Benz saw sales declines of over 10% in the first three quarters of this year, while Audi fared slightly better with an 8.5% decline. In recent years, emerging domestic luxury new energy brands such as NIO, Wenjie, and Lixiang have emerged as formidable competitors, gradually eroding the market share of traditional luxury brands. To compete with new energy vehicles, BBA models often offer discounts exceeding 100,000 yuan, with discounts on the BMW 5 Series exceeding 150,000 yuan, resulting in a landing price of only around 300,000 yuan. The Mercedes-Benz C-Class sees a price reduction of over 40%, while the Audi A6L also witnesses a price reduction of over 30%. These declining prices have further tarnished the image of luxury brands, making it increasingly difficult to sell luxury cars.

The downstream dealer business of traditional luxury brands has gradually transformed from a once-profitable venture to a burdensome one. More and more luxury brand dealers are grappling with store closures, bankruptcy, and cash flow crises. Transitioning from traditional luxury brands to embracing "new energy" has become a realistic choice for many dealers. Reports indicate that in November, Zhongsheng Group announced the integration of 50 Huawei Smart Selection Car authorized stores into Benz, BMW, and Audi stores, gradually transforming them into Wenjie 4S stores. Wei Jian, Vice President of NIO, also stated that over 40 traditional luxury brand dealers have switched to NIO.

Compared to fuel vehicles, new energy vehicles are not only experiencing rapid sales growth but are also highly attractive from a policy perspective. New energy manufacturers do not burden dealers with inventory issues, and terminal prices are transparent, with consistent preferential policies for both direct sales and dealer channels. The choice between traditional luxury brands, whose momentum has waned, and luxury new energy vehicles, which are gradually gaining ground, is clear. The market indicates that the Chinese automobile market continues to accelerate its reshuffle. When sales and profits become difficult to guarantee, whether a brand is luxury or not, it will inevitably face elimination. Whether prepared or not, the historic consolidation and reshuffle of dealers is unstoppable.

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