Writer | Xingxing

Source | Beiduo Business & Beiduo Finance

Recently, Porsche unveiled its 2035 mid-term strategy, dubbed 'Sportwagenschmiede’35,' which places 'quality over quantity' at its heart. The automaker has abandoned its previously ambitious electrification goals, opting instead for a 'three-pronged' powertrain strategy that encompasses combustion engines, hybrids, and electric vehicles (EVs).

From a strategic perspective, this marks a systematic retreat with a distinctly defensive tone. When sales of the Taycan and the all-electric Macan failed to live up to its electrification hopes, Porsche swiftly adjusted its battle lines, reverting to high-margin combustion-engine models and personalized customization services, all while prioritizing brand cash flow and maintaining its premium market position.

Yet, the costs associated with this proactive strategic shift are undeniable. On one hand, asset write-downs and the erosion of trust resulting from Porsche's earlier aggressive strategy are significant. On the other, given its lack of electrification competitiveness in the Chinese market, will further investment in combustion-engine supercars and D/E-segment luxury models truly address its electrification and intelligent technology shortcomings?

These questions will undoubtedly shape Porsche's short-term performance and determine the success of its long-term transformation.

I. Strategic Shift: Redrawing the Roadmap with 'Quality Over Quantity'

At the Capital Markets Day held at Porsche's R&D center in Weissach, Germany, Michael Leiters, Chairman of the Executive Board, clearly stated that the brand aims to transform in a leaner, faster, more efficient, and resilient manner, with 'quality over quantity' as its guiding principle.

In simpler terms, this means shifting the focus from mere sales expansion to enhancing per-unit profitability, reducing operational burdens, and solidifying brand positioning.

In terms of organization and cost, Porsche's plan can be dissected into three key areas: 'headcount reduction, cost-cutting, and efficiency gains.' The company anticipates responsibly cutting approximately 9,000 positions. Over the medium term, staffing in direct and indirect functional departments is expected to decrease by 25%, with a strategic target of 30%. Overall labor costs are projected to decline by around 10%.

Moreover, Porsche intends to reduce sales and distribution costs by 20% through organizational optimization and improved dealer and sales efficiency. Per-unit material costs for new model projects are also set to decrease by about 10% compared to previous levels, primarily by increasing the use of common parts and focusing on brand-differentiating configurations.

More notably, Porsche is proactively slowing its electrification pace. The brand has announced that it will no longer solely rely on the electric vehicle market, adopting instead a 'parallel combustion, plug-in hybrid, and electric' strategy. It will reinvest in updating its combustion-engine lineup, with main model series retaining combustion and plug-in hybrid versions through the mid-to-late 2030s.

Under this plan, Porsche will streamline its product portfolio and concentrate on high-margin segments. The number of model derivatives is expected to decrease by about 20%, while resource allocation to the D/E-segment market will increase. This includes developing a new flagship sports car series positioned above the 911 and exploring the possibility of a D-segment SUV positioned above the Cayenne.

Porsche's objective with this combination of measures is evident: by reducing the number of models, it aims to boost average sales per variant by about 30%, lowering the breakeven point. This would enable the brand to achieve profitability at a new vehicle sales volume below 200,000 units, trading a more concentrated product portfolio for higher per-unit profit margins.

II. Electrification Hurdles: The Price of Ambitious Targets and Strategic Corrections

However, the emphasis on 'quality over quantity' and cost discipline highlights the challenges Porsche faced on its previous electrification path.

Rewind to March 2023: Porsche, buoyed by its successful IPO, boldly announced plans to invest over €20 billion in electrification and intelligent technologies, setting a target for electric vehicles (EVs) to account for over 80% of its lineup by 2030. Under this plan, entry-level models like the Macan SUV and 718 sports car were earmarked for electric versions.

But this electric gamble failed to yield the expected market returns. Porsche's 2025 performance was under pressure globally, with 279,400 deliveries, marking a 10.1% year-on-year decline. Chinese deliveries plummeted by 26% to just 41,900 units, far outpacing declines in other major markets.

This reflected both external pressures from weakening global luxury car demand and internal issues with Porsche's product iteration pace and powertrain strategy. Its former profit pillar, the Cayenne series, saw deliveries fall 21% to 80,886 units in 2025. Taycan deliveries also dropped 22% to 16,339 units, primarily due to slowed electric mobility adoption.

In contrast, the Macan series delivered 84,328 units in 2025, a 2% year-on-year increase, making it the only major model line to grow. The all-electric Macan EV contributed 45,367 units, over half of the total. However, this single model's growth could not offset the broader market contraction, revealing a clear disconnect between old and new growth drivers.

Amid this product lineup gap, Porsche's financials took a hit. Full-year 2025 revenue reached €36.27 billion, down 9.5% year-on-year. Operating profit plunged 92.7% to €413 million, with the return on sales crashing from 14.1% in 2024 to just 1.1%.

Porsche's profit defense line crumbled under €3.9 billion in special charges. Product strategy adjustments and scale optimizations cost €2.4 billion in 2025, while battery business extras and U.S. tariff impacts added €700 million each—a steep price for its aggressive and inconsistent electrification strategy.

Ultimately, former CEO Oliver Blume admitted strategic missteps with the Macan EV, scrapping the 2030 target of 80% EV sales. The cost of these corrections is now embedded in Porsche's financials, burdening its new 'quality over quantity' strategy from the outset.

III. Strategic Correction: Profit Recovery Cannot Conceal Growth Stagnation

By the first half of 2026, Porsche's operating profit rebounded to €1.348 billion, up 33.9% year-on-year, with the return on sales rising 2.3 percentage points to 7.8%. Cost-cutting measures, including headcount reductions and a focus on high-priced models, at least halted the financial bleeding.

However, profit recovery could not obscure ongoing delivery pressures. Global deliveries fell 16% year-on-year to 122,300 units in H1 2026. China performed especially poorly, with just 14,500 deliveries, a 31.9% drop, accounting for only 12% of global sales. Demand-side pressures remained acute.

In the first three quarters of 2026, Porsche delivered 21,493 new vehicles in China, down 33% year-on-year. The company stated it would continue its value-driven sales strategy in China, prioritizing long-term brand development over short-term sales targets, and expects full-year Chinese sales to fall further to around 30,000 units.

The crux of the issue is that Porsche's notion of 'value' may not align with Chinese consumers' definitions of 'luxury.' In the premium segment above ¥500,000, local brands now offer intelligent cockpits, advanced driving assistance, and charging experiences that are increasingly displacing heritage brand appeal as key product decision factors.

Porsche's product competitiveness gap in China will not close through strategic retreat alone. Even as it emphasizes continued investment in next-gen battery tech, the shifting of strategic resources toward combustion supercars and D/E-segment luxury models risks sidelining intelligence and localization priorities.

In other words, Porsche's 'quality over quantity' approach resembles a defensive battle for profit through contraction. In a market where luxury value judgments are shifting from 'mechanical excellence' to 'software experience,' whether Porsche's brand premium can sustain its pricing power and relevance remains an open question.