Porsche Photo: depositphotos
Porsche AG announced a reduction in its annual forecast due to a shortage of aluminum parts, which could lead to a halt in the production of some car models. Shares of the luxury carmaker fell by 7.7% on the Frankfurt Stock Exchange, marking the largest drop since trading began in September 2022, as reported by Bloomberg.
Forecast Reduction and Consequences
The German manufacturer now expects a return on sales of up to 15%, compared to a previous high of 17%. The Volkswagen AG-controlled company, which is grappling with weak demand in China, also lowered its forecast for revenue and the proportion of electric vehicle sales. The parts shortage resulted from the flooding of a production facility of a key European supplier. This issue has affected aluminum components used in all of the brand’s vehicles and could impact production for several weeks.
Analysts’ Comments and Potential Impact on Other Manufacturers
Analysts at Bernstein, led by Stephen Reitman, noted that Porsche will be closely scrutinized for its cluster risk management, which left it vulnerable to problems with one critical supplier. According to the company, the issues will lead to the underproduction of at least 10,000 cars in the second half of the year.
The supplier declared force majeure, a measure companies use when events beyond their control prevent them from doing business. Several European countries, including Switzerland, have recently experienced significant flooding. This suggests that other carmakers could also be affected, noted Morgan Stanley analyst Javier Martinez de Olcoz Cerdan.
Porsche’s shares have declined approximately 13% this year, while Volkswagen fell by 2.3%. Audi, another premium brand owned by Volkswagen, reported a shortage of special aluminum alloys at multiple suppliers due to flooding, but this is not directly impacting production.
Bloomberg Intelligence Forecast
Bloomberg Intelligence analyst Michael Dean noted that Porsche’s 2024 forecast reduction due to flooding at a key aluminum supplier, which may result in the loss of 10,000 units of production, does not alter the 2025 forecast or sequential margin improvement for Q2. EBIT margin guidance for 2024 is now 14-15% (down from 15-17%), which will likely lead to a 10% cut in consensus EBIT.
Impact on Sales and Future Actions
In the first half of the year, Porsche’s deliveries declined as consumers shied away from big-ticket purchases in China, where a prolonged real estate crisis is deterring luxury buyers. The slowdown in China is affecting demand for a broad range of premium items, including watches and designer clothing. Porsche is also facing high costs due to several model changeovers, with next year billed as a turnaround point.
Other Manufacturers and Suppliers
While Porsche did not name the supplier, aluminum parts maker Constellium SE suspended operations at its Sierre and Chippis plants in Switzerland earlier this month due to severe flooding. The manufacturer’s clients include Porsche, Volkswagen, Stellantis, Mercedes-Benz, Ford, and BMW.
Volkswagen and Mercedes-Benz declined to comment on the situation, while BMW stated that its production is not affected. Constellium, which operates several facilities in Europe and the US, could not immediately provide comments.
Future Plans
The forecast reduction followed Porsche’s announcement on Monday of scaling back its electric vehicle sales ambitions due to lower-than-expected growth in Europe and China. The company will release its half-year results on July 24.
