Porsche Faces Severe Sales Decline as China Innovation Surges

UPDATE: Porsche is facing a critical crisis in China, with sales plummeting by 28 percent to just 56,887 cars in 2024, and a further 26 percent decline noted through September this year. In an urgent interview with German business newspaper Automobilwoche, Porsche China CEO Alexander Pollich emphasized that the rapid pace of innovation from local automakers has left the luxury brand struggling to compete.

This dramatic downturn is compounded by the introduction of a new lower luxury tax threshold, which dropped from 1.3 million yuan ($184,000) to 900,000 yuan ($127,000) on July 20, 2023. This shift has made Porsche vehicles even more unaffordable, as the average net list price for a new Porsche in China now sits under 1 million yuan ($141,000).

In response to this urgent situation, Porsche has unveiled its “Winning Back China” strategy. However, Pollich acknowledges that reverting to previous sales volumes is unrealistic. The company is set to reduce its dealerships from 150 to just 80 by the end of next year, signaling a dramatic shift in its operational strategy.

The fierce competition, particularly in the electric vehicle (EV) market, has created a “veritable flood” of alternatives at various price points. While the Taycan was initially successful, Pollich notes that the landscape has drastically changed. Porsche is adapting by launching new gas-fueled SUVs, including a replacement for the Macan and a three-row vehicle that, contrary to previous plans, will first feature combustion engines.

Despite the focus on traditional engines, electric vehicles remain a part of Porsche’s strategy. The Cayenne Electric is set for a local launch, and the upcoming 718 EV is touted to be “unique in China in terms of its sportiness.” However, details on this remain sparse, leaving many questions about its potential impact.

As Porsche navigates this turbulent environment, Pollich warns of a “challenging” outlook for 2026, with new SUV models not expected until later this decade. The situation reflects a broader trend; rival automakers like BMW, Mercedes, and Audi have also experienced declines in the fiercely competitive Chinese market, highlighting an urgent need for innovation and strategic realignment.

As local manufacturers continue to dominate, Porsche’s heavy investment in electric vehicles has not yielded the expected results. The shift back to combustion engines may be a gamble that could either stem losses or further entrench the brand’s challenges.

Porsche’s struggle serves as a stark reminder of the rapidly evolving automotive landscape in China. With consumers flocking to more affordable, innovative options, the pressure is on for legacy brands to adapt or risk falling behind in one of the world’s largest car markets.