Porsche share price at risk as China sales plummet

Porsche share price has been in a strong bearish downtrend this year and is hovering near its all-time low as demand worsens. It has moved to €42.7, a few points above the record low of €38.42. This sell-off could continue as its Chinese sales slump. 

Porsche share price at risk as Chinese sales slump

Porsche, one of the biggest companies in the biggest luxury car market, is facing major headwinds as its sales in its key markets tumble.

In a statement on Thursday, the company noted that its sales in China tumbled by 21% in the third quarter as luxury car demand waned and as Chinese opted for local vehicles by companies like Nio, Xpeng, and Xiaomi

As a result, its deliveries dropped by 5.7% in the quarter to 66,000 vehicles. This crash mirrored the performance of other German vehicles like Mercedes-Benz and BMW.

Porsche has also continued to struggle in Europe, where demand for vehicles has stalled and where Chinese brands like BYD and Nio have started to gain market share.

Most importantly, the company's business in the United States has deteriorated, a trend that may continue after Donald Trump added tariffs on European vehicles. Porsche is more exposed to these tariffs because, unlike BMW and Mercedes, it has no manufacturing plants in the US. This explains why the company has slashed its guidance four times this year.

Porsche’s profitability is in trouble

The most recent results showed that Porsche’s business continued to deteriorate in the first half of the year. Its sales dropped to €18.15 billion in the year’s first half from the €19.4 billion in the same period last year. This revenue happened as the company sold 146k vehicles, down from the previous 155k.

Most importantly, the company's profitability continued to crash in the year's first half dropped to €718 million from €2.15 billion in the same period last year.

Porsche is taking action to remedy the ongoing slump. For example, it is slowing the rollout of electric vehicles and is focusing mostly on internal combustion engine (ICE) vehicles. For example, the new Cayenne, which was initially expected to be an EV, will initially be offered as an ICE vehicle.

Also, the existing combustion engine models will remain available for longer, with the company planning to rollout successor models for the coming years.

Additionally, Porsche noted that it would reschedule the development of new platforms for electric vehicles. The impact of all this is that the management expects that it will report substantially higher losses in terms of depreciation in the near term.

Porsche’s change of tune is an admission that the EV strategy that it launched a few years ago is not working. While its initial Porsche Taycan had strong sales initially, the trajectory faded as these vehicles experienced substantial depreciation.

Porsche stock price analysis 

The daily timeframe chart shows that the Porsche stock price attempted to recover a few months ago and then found substantial resistance at €47.72 in July.

It has now plunged and moved below the 50-day and 100-day Exponential Moving Averages (EMA). It is nearing the important support level at €38.42, its lowest level in April this year.

The stock has also formed a small rising wedge pattern, which is a common bearish reversal pattern.

Therefore, the stock will likely have a strong bearish breakout in the coming weeks, with the next target to watch being at €38.42, its lowest level in April.