Strategic Retrenchment

Amid the rapid rise of China's new energy high-end market, the technological advantages, luxury experience, and even brand value of traditional luxury brands no longer seem exclusive.

This year, the chill has practically reached every luxury brand. However, Porsche's "avalanche" has hit harder compared to other struggling brands.

From plummeting sales, dealer pressure in May, to changes in Porsche China's President and CEO, Porsche's terminal price falling below 400,000 yuan, dealership closures, layoffs, and the change in Porsche China's Vice President and Chief Operating Officer—Porsche has faced constant turmoil over the past year.

While there is no direct data indicating that new brands like Xiaomi, AITO, NIO, and Lixiang have impacted Porsche's customer base, the sales decline and other external factors have indeed caused Porsche to struggle.

Therefore, Porsche's recent series of measures are seen as efforts to conserve energy and "survive the winter." Whether it's abandoning less important aspects to protect the core or cutting off an arm to survive, stabilizing prices, preserving brand strength, contracting operations, and waiting for the Chinese market to recover are choices that many luxury brands have to make at the moment.

According to Porsche China's President and CEO Jan Lichte, the hibernation period from 2023 to 2024 can be compared to a "strategic pit stop" in a race. 2025 will be the "warm-up lap" to store energy for the future; starting from 2026, Porsche will restart its aggressive mode and prepare for the next race on the Chinese track.

'We will not sacrifice product prices to exchange for sales growth. Purely pursuing growth in quantity is not Porsche's goal.' Jan Lichte's words clearly indicate that Porsche's primary task remains upholding the luxury attributes of the brand. Layoffs and Store Closures

On December 17, the topic of "Porsche China Layoffs" trended on Weibo. According to multiple media reports, the luxury automaker Porsche has initiated a 30% layoff in China, including permanent and contract positions, with compensation potentially following the N+6 standard.

In response, Porsche China officially denied the reports, stating, "Facing a complex market environment, we are indeed optimizing and reorganizing our internal organizational structure to maintain sustainable development amidst rapid industry transformation. In this context, Porsche China is continuously improving the efficiency of various departments and projects and optimizing costs. Depending on the actual situation, relevant measures also involve direct and indirect labor costs, including administrative expenses, travel expenses, and training costs."

In addition to organizational restructuring, Porsche's dealerships in China are also set to contract. According to the plan, Porsche will reduce its dealership network from 150 to around 100 by the end of 2026.

Behind the layoffs and store closures lies a severe decline in Porsche sales. According to data released by Porsche, global sales fell 7% to 226,026 units in the first three quarters of this year, with a 9% decline in the North American market and a steep 29% drop in the Chinese market. Specifically, sales of the Panamera and Taycan fell the most, by 20% and 50%, respectively.

Image Source: Porsche

It is reported that Porsche's largest 4S store in Beijing used to sell nearly 100 new cars per month during its peak period, but now only sells around 40 to 50 cars per month on average.

With declining sales, revenue figures have also been falling. Porsche's financial report for the first three quarters of 2024 shows that its global revenue was 28.56 billion euros, a year-on-year decrease of 5.2%; operating profit was 974 million euros, a steep drop of 41%.

Although Porsche officials have repeatedly emphasized that they will not join the "price war" for sales, in the terminal market, prices have already fallen. As a representative of luxury cars, Porsche was once "unavailable even with a price increase," but this year, it has become "difficult to sell even with a price reduction." From an overall market perspective, the domestic million-yuan luxury car market has almost shown a contracting trend. However, due to Porsche's relatively large base, the fluctuations are more pronounced. According to data compiled by Cui Dongshu, Secretary-General of the China Passenger Car Association, super-luxury imported cars accelerated their decline in the first three quarters of this year, with cumulative growth rates plunging by 60%. In Cui Dongshu's view, the overall weakness in super-luxury cars reflects a temporary slowdown in purchasing power among ultra-high-end consumers or a shift to domestically produced high-end products.

Luxury Porsche ultimately could not escape the fate of being "replaced" by cheaper alternatives.

Senior Management Reshuffling

While the organizational structure and dealer network are undergoing changes, the reshuffling of Porsche's senior management continues.

On December 4, Porsche officially announced the appointment of Li Nan as Vice President of Porsche China's Technical Department. Additionally, the newly established Technical Department also has the functions of local procurement and quality assurance, coordinating Porsche's research and development work in China and reporting directly to Porsche China's CEO Jan Lichte. Before joining Porsche, Li Nan held senior positions at Mercedes-Benz.

The Chinese automotive consumer market is now distinctly different from Germany and other parts of Europe. The development of intelligent electric vehicles in China is ahead of the global curve, and compared to other regions, Chinese consumers prefer products with technological elements.

Therefore, from Porsche's perspective, to accelerate its electrification and intelligence efforts, the most important step is to establish a research and development center in China and appoint Li Nan, a native Chinese technical talent, as Vice President of the Technical Department in China. "Li Nan's market insights and professional abilities can accelerate Porsche's product upgrades in areas such as vehicle connectivity and intelligent driving."

Jan Lichte stated that China's research and development achievements will be applied to all Porsche models, and the new technical department will maintain close cooperation with the research and development headquarters in Weissach. Moreover, localized research and development in China will not just be on paper but will involve pragmatic and substantial investments.

Image Source: Porsche

In addition, on December 12, Porsche also announced that Philipp von Witzendorff will officially take up the position of Vice President and Chief Operating Officer of Porsche China from January 1, 2025. It is understood that for the past two years, Philipp von Witzendorff has served as President and CEO of Porsche Japan.

Porsche's unwavering commitment to the Chinese market is evident, but the growth momentum and high-end breakthroughs of Chinese brands are unprecedented. After breaking into the sales rankings of 500,000 yuan luxury models, multiple brands have already begun to compete in the million-yuan market. Judging from the sales performance of BYD's Look up in the past year, the results have been relatively satisfactory.

With its newly established local technical department, it will not be easy for Porsche to catch up with the pace of intelligence within two years. More importantly, in 2025, a large number of new products and technologies from Chinese brands will be launched, and Porsche will face even more severe challenges at that time.

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