Electric Porsche? Yes, But.

On 7 October 2026, Porsche AG will present “Sportwagenschmiede '35”¹ at its Capital Markets Day². By then, however, the company will already have redefined its product strategy, its board, its corporate perimeter, its sales structure, its marketing model, its management team and even its collective labour agreement. In this article I reconstruct that sequence from the information Porsche has made available through its news portal (Porsche Newsroom), I analyse the accounts from 2023 to 2026, and I venture a forecast for this year's close. It should be borne in mind that this Porsche story adds new nuances to my earlier thesis in “There is no European Lee Iacocca” (Fèvre, 2026), since the EU and Co-determination³ did not unduly obstruct the rapid adaptation at Zuffenhausen⁴, and this appears to be because Porsche has a strong image and the liquidity required to pay for consent in its negotiations.

The Event Is Not an Announcement

An event such as the so-called Capital Markets Day is usually interpreted as a starting point, a moment of sorts at which a strategy is unveiled and its execution begins. In Porsche's case, this conference is rather different, because before the presentation in Stuttgart even starts, the company will already have reduced its executive board from eight departments to seven, integrated Car-IT⁵ into R&D, closed three subsidiaries, sold its consulting business, replaced its head of production, agreed a package of labour measures, reduced its sales regions from five to four, and appointed a single global lead agency with effect from January 2027. The conference that normally serves to announce what is new will come after a considerable number of highly relevant business actions have already been executed. It will be most interesting to hear what further actions will be taken after 7 October, or what the expected effects of the changes already executed will be.

The usual approach in any sector would have been to announce a situation and an objective and then to negotiate, plant by plant and administration by administration, but with a plan already on the table. In “There is no European Lee Iacocca” I argued that Europe is repeating Detroit's script of the 1970s under structurally worse conditions, and that the distinguishing variable is the governance exercised over the restructuring itself which, in the European case, turns it into a permanent negotiation (Fèvre, 2026). Porsche is no stranger to this situation, since half of the seats on its supervisory board (Aufsichtsrat⁶) are held by employee representatives under the Co-determination Act of 1976⁷, which means that IG Metall⁸ takes part in every important decision concerning its plants.

The 2025 Accounts Show the Price of a Reversed Plan

The figures for the 2025 year-end offer a series of indicators that are easy to read and point to an unquestionable diagnosis. On the economic side, group sales revenue fell by 9.5% to €36 billion, operating profit collapsed from €5,640 million to €413 million, the return on sales fell from 14% to 1%, the operating result of the automotive division was €90 million, the EBITDA-to-sales ratio fell from 23% to 13%, and deliveries of new units declined by 10% to 279,449 vehicles (Porsche AG, 2026c). It is more than evident that a 93% fall in operating profit is an unmistakable indicator of a company going through serious difficulties.

Nevertheless, after analysing in depth the reports and news made public by the brand, one can discover a series of actions that had a major impact on the financial year. During 2025 the company absorbed extraordinary expenses of approximately €3,900 million, broken down into some €2,400 million devoted precisely to the realignment of the product strategy and the rescaling of the company, some €700 million for the strategic changes relating to its battery business, and some €700 million corresponding to the tariffs imposed by the United States (Porsche AG, 2026b). Excluding these three items, operating profit would have been of the order of €4,300 million and the return on sales would have stood in double digits, albeit low ones. As for the treasury position, automotive net cash flow reached €1,510 million and net liquidity closed the year at €7,350 million. It is precisely these indicators that give a very different nuance to the income statement as such, and they suggest that, rather than a company that has lost control of its operations, these are the results of a company that has decided to take its adjustment in a single step.

The €2,400 million item is the one that really matters from an analytical standpoint, since it is not a mere operating loss as it might appear at first sight. To understand the decision properly I think it is worth providing some context by going back to the middle of 2025, and more specifically to July, when the restructuring was still a modest measure. The situation and the decisions taken up to that point warranted provisions of some €200 million in extraordinary expenses, together with €500 million arising from the first changes related to the battery commitment and, in addition, €400 million for the first American tariffs. Subsequently, on 19 September 2025, the Executive and Supervisory Boards took the decision that the rest of the year would be devoted to absorbing the costs and continuing with the adjustments to its balance sheet. Particularly significant was the change to the announced launch of the new SUV positioned above the Cayenne which, although initially planned with all-electric propulsion, would arrive first with combustion engines and plug-in hybrids, while the development of the new electric platform was rescheduled to the 2030s. This required impairments of capitalised development costs and provisions of up to €1,800 million in that financial year alone. The same announcement lowered the medium-term margin objective to the lower end of the expected range and put the year's extraordinary expenses at around €3,100 million, although the figure finally booked was €3,900 million (Porsche AG, 2025a, 2025b, 2026b). There are two aspects of that sequence that deserve to be highlighted: first, the decision was taken before the new chairman took office, so it was not the customary “change of course” that an incoming chief executive usually undertakes on arrival; and second, it was taken in the quarter in which the conclusion was reached, rather than being deferred to the year-end review, as is customary in any industry. Paradoxically, it is also notable that the share of electric vehicles sold rose in 2025, from 12.7% to 22.2%, precisely in the year in which profitability collapsed. One could infer that the electric transition was not failing from a commercial standpoint, but that it was failing in terms of profitability because of the mix of products sold. Returning to my article on the analogy with the American crisis of the 1970s, it took Detroit roughly a decade to make that distinction, whereas Porsche's management understood it in a substantially shorter period.

Twelve Months of Implementation

Reading the news Porsche has communicated to its shareholders, the announcements of the last nine months form a pattern and a guide connected to the decisions taken since September 2025.

This chain of systematic announcements shows that changes are being executed in several areas at once across the group. On the one hand, the company's perimeter is being redefined, which amounts to what the company contains, and in this area the decision on Cellforce¹⁰ is particularly notable, as it no longer had, in the company's own words, a sufficiently viable long-term perspective within a technology-open propulsion strategy (Porsche AG, 2026f).

On another level, the governance structures of the company, where decisions are taken, are being redefined: a department of the executive board is eliminated, two central sales units are dissolved and responsibility is transferred to four regions, with explicit reference to the speed of decision-making (Porsche AG, 2026n).

A third pole of transformation is the financial one, the focus on a new product mix and on what it costs to operate the manufacturing plants, which is precisely the objective of the “Future Package”.

Finally, workforce reduction and adjustment plans are beginning to be undertaken in order to improve efficiency and productivity.

The sale of MHP¹¹ illustrates how deliberate the intention is to create a leaner organisation focused on developing its “core business”, and also where the strategy is most exposed. Porsche sold the consultancy in its entirety to Tata Consultancy Services while at the same time signing a collaboration agreement with the buyer on digital solutions and artificial intelligence, and MHP, which employs more than 4,500 people, remains a partner for Porsche's own digitalisation (Porsche AG, 2026l); in other words, the development of what constitutes a competitive difference will be retained and what does not is subcontracted, without owning the asset itself.

In any event, it is important to recall that Professors Christensen and Raynor (2003) described the mechanism by which an integrated company disintegrates, ceding successive layers to suppliers because at that moment that is not where the competitive advantage lies; what ceases to be observed, however, is that the supplier may accumulate those layers and end up taking control of the architecture and of the customer. As a whole, Europe has already carried out this experiment in this very sector, subcontracting cell manufacturing, battery control electronics and software to Asian suppliers who used those contracts to develop precisely the competence that now sustains the new Chinese competitors. The relevant question is therefore not the nationality of the counterparty, but whether the subcontracted unit could be the next focus of value and differentiation.

On the other hand, TCS is a Tata Sons company, as is Tata Motors Passenger Vehicles, owner of Jaguar Land Rover, the group's electric vehicle division, and of Tata Technologies, which is itself a provider of automotive engineering services. None of this appears to make TCS a potential future competitor of Porsche, but it does mean that the separation between a consultancy holding deep knowledge of Porsche's processes and systems and a group whose passenger-vehicle division competes in high-end segments is contractual rather than structural. Porsche disclosed neither the price nor the terms, confining itself to stating that MHP retains its brand and its independence and that the collaboration continues (Porsche AG, 2026l). Therefore, on the basis of the publicly available information, it cannot be demonstrated that the protection such an agreement requires exists. This is not an accusation, but an information gap, and it is reasonable for shareholders and the works council to want it closed.

Returning to the change in the company's governance as a pillar of transformation, it is highly significant that Albrecht Reimold left the Production and Logistics department a year before his contract expired, and that Christian Friedl moved from the Corporate Quality department to take a seat on the executive board on 1 September with an explicitly operational mandate: to integrate the electrified 718 into the existing assembly line for the combustion 911, so that different powertrain variants are built on the same line (Porsche AG, 2026m). Jan Becker, until recently chief executive of the eBike Performance division, which is in the process of being wound up, returns on 1 October to lead Porsche Lifestyle (Porsche AG, 2026i). The sales reorganisation entails a further series of appointments in Europe, the Americas, the rest of the world, Switzerland, France and Australia (Porsche AG, 2026n). Porsche is modifying its governance structures without resorting to external executives, which preserves the continuity of technical knowledge while breaking organisational continuity. For a company whose competitive advantage lies in engineering practice rather than in patents, this is a defensible choice.

Most restructurings address the axes of transformation individually and discover the others too late.

The Future Package

The agreement reached on 27 July between the Executive Board, the General Works Council, IG Metall and the employers' association Südwestmetall is the most important document of the year and is worth examining closely (Porsche AG, 2026j). Porsche undertakes to make a cumulative investment of €2,100 million in Zuffenhausen and Weissach and extends employment and site protection until the end of 2035, ruling out compulsory redundancies during that period. In exchange, 3.5% of the current and future pay increases agreed in the collective agreement is deferred until 2035; senior and top management waive an equivalent contribution in 2027 and 2028; the voluntary component of the Christmas bonus is reduced from 45% to 5%, which lowers that payment from up to 100% to 60% of a monthly salary; mobile working is reduced from twelve days a month to eight; break arrangements and production cycle times are amended; and, most substantially, a further 5,000 positions will be removed (representing 12% of the group's current workforce and 20% of Porsche AG) between now and 2035 through natural attrition, demographic effects, partial retirement and voluntary departures.

We could say, then, that this argument qualifies the claim that European governance, and German governance more specifically, makes restructuring impossible. There are three structural conditions distinguishing Zuffenhausen (Porsche) from Wolfsburg (VW), and all three are absent in the larger company.

In the first place, Volkswagen AG holds 75% minus one of Porsche AG's ordinary shares, while Porsche SE holds 25% plus one (a blocking minority). At Porsche there is no regional government at the negotiating table and no law requiring a two-thirds majority on the supervisory board for decisions concerning production plants¹². Parity co-determination at Porsche is a negotiation with a single counterparty, whereas at Volkswagen it is complicated by a political veto.

In the second place, the perimeter is more compact in Porsche's case, since the agreement covers two plants in a single federal state, without a dispersed industrial map whose closures would be electoral events in several of them, as happens to VW.

In the third place, Porsche could afford to pay to facilitate consent, since the net liquidity of its automotive business stood at €7.35 billion at the close of 2025, which makes an investment commitment of €2.1 billion highly credible. Concessions are considerably cheaper to obtain when the employer can commit to spending rather than merely promising to survive.

German co-determination is workable when there is a single principal, a compact perimeter and a balance sheet capable of financing an agreement. Where those conditions are absent, the same institutions give rise to the permanent negotiation described in my previous article, which is precisely the situation in which Volkswagen has found itself while debating a restructuring of up to 100,000 jobs and four of its plants.

Technology and Transparency as the Recovery of Information

The product pillar of “Strategy 2035” has been set out with a clarity that is unusual for the automotive industry, in which secrecy tends to prevail in every area and especially the strategic one. Porsche has publicly announced that it will continue to invest in all three types of propulsion and that the hybrid (combustion/electric) is explicitly not regarded as a transitional technology, and that there will be no fully electric 911. In addition, the number of model variants is being reduced considerably and, as a symbol of this, two Taycan body variants have already been discontinued in the United States in response to the preferences of customers in that market (Porsche AG, 2026h). The decision has been taken to subordinate the choice of propulsion system to the profitability of the product and to the response of consumers, rather than imposing a technological criterion against the wishes of the potential customer.

As a consequence, Porsche's share of electric vehicles fell to 19.4% in the first half of 2026, down from 23.5% a year earlier (Porsche AG, 2026k), precisely in the same half-year in which the European Union's share of electric vehicles rose from 15.6% to 20.7%, while hybrids remained the best-selling category at 37.3% and plug-in hybrids accounted for 9.8% (ACEA, 2026). It is highly significant that the market appeared to be moving in the opposite direction to Porsche, but that divergence is the hallmark of a demand curve determined by incentives and utility in the high-volume segments, which is precisely where a sports car manufacturer is not present.

This brings us back to the objection I raised in another article, where I noted that the EU's CO₂ regulation prescribed, with legal force, a technology, a calendar and an annual quantity for a sector the regulator does not own. The knowledge required for that coordination (costs, preferences, local conditions and technological possibilities) is dispersed among millions of agents and no authority can aggregate it, as Hayek (1945) describes in “The Use of Knowledge in Society”. As also described, in December 2025 the European Commission proposed replacing the zero-emission requirement for 2035 with a 90% reduction target, although the file will remain subject to negotiation between Parliament and Council throughout 2026 (European Commission, 2025). I repeat the qualification that this is a claim about the informational structure and not about ownership, since the point is not that Brussels administers a planned economy, but that an administrative target substitutes for the market's discovery of the appropriate pace and mix and therefore incurs the characteristic failure mode that Hayek (1945) also described, which is none other than correction imposed once the damage is already visible.

The conversion of Zuffenhausen, to which a CAPEX¹³ of €250 million has been allocated, is being designed so that cars with different propulsion systems can be assembled on the same line using automated guided vehicles instead of a fixed line (Porsche AG, 2023). As mentioned earlier, the integration of the electric 718 into the 911 line is the first task assigned to Christian Friedl as the new member of the executive board responsible for production (Porsche AG, 2026m). Redesigning a plant so that it is capable of manufacturing two types of propulsion system enables the company, on the one hand, to face the electrification of certain units and, on the other, provides protection against being wrong about the timing of its implementation. In a market whose regulator has already reversed course once, the value of that second option is not a minor one.

What the 2026 Close Might Look Like

According to the company's own data, Porsche's forecasts for the year point to revenue of between €35,000 and €36,000 million, a group operating margin on sales of 5.5% to 7.5% after extraordinary expenses of between €800 and €900 million and tariff costs of approximately €700 million, an EBITDA-to-sales ratio for its automotive business of 15% to 17%, a share of electric vehicles of around 25%, and a net cash flow margin that was raised on 9 September from 3-5% to 5.5-7.5% following completion of the Rimac divestments (Porsche AG, 2026h, 2026k, 2026o).

Published figures for 2023-2025 and the first half of 2026; company forecasts for 2026.
* The upward-revised cash flow range reflects disposal proceeds of approximately €1,000 million, of which €250 million is allocated to pension funding, so that it does not constitute evidence of an improvement in the generation of operating cash flow.
** Author's extrapolation: deliveries, headcount and the derived ratios are not based on the company's forecasts, and the 2026 headcount estimate excludes any effect of the sale of MHP, whose completion would remove a further 4,500 employees from the consolidated perimeter. Revenue and vehicles per employee are calculated by the author from the group headcount at the close of the financial year, which includes the financial services segment and the subsidiaries.
Sources: Porsche AG financial reports for 2025 and half-year report for 2026.

Despite the evident discontinuity of the 2025 figures, the erosion had already begun earlier, between 2023 and 2024, with revenue practically stable, an operating result falling by 23%, a return on sales that dropped by 3.9 percentage points and an EBITDA margin down 3 percentage points, while the share of electric vehicles barely changed. The indicators of production volume and headcount together explain the reason for the “Future Package”, since production fell by 22% between 2023 and 2025, while the workforce was reduced by less than 1%.

It should be noted that there are two parallel workforce adjustment measures: on the one hand the announced “Future Package” and on the other the Strukturpaket¹⁴. Both programmes together will mean the removal of approximately 8,900 jobs between 2024 and 2035, and not the 5,000 that have been published as the headline of the July agreement. Secondly, some 2,400 of those positions had already been removed by the end of 2025, principally the temporary contracts, so that the reduction still to come is of the order of 6,500.

On that basis, the “Future Package” can be assessed properly, and it proves less ambitious than its headline initially suggests. If we apply the remaining reduction of some 6,500 positions to the group's 41,780 employees at the end of 2025, we obtain an approximate figure of 35,300 for 2035. Table 3 shows how this affects the productivity ratio, holding revenue at the level of the 2026 closing forecast.

In the light of the data the company has disclosed, one could infer that, after a decade of workforce reduction, deferred pay increases and reduced bonuses, the nominal productivity of 2023 could be recovered and exceeded by approximately 4%. In reality, in real terms such productivity would not be reached, since adjusting the 2023 ratio to 2035 prices would require total revenue of some €43,000 million, 21% above the initial forecast. The residual gap must be covered through higher revenue per vehicle, through the higher-margin derivative products that have been promised (but for which there is still no date), or through a reduction greater than the one agreed last July.

To be precise in analysing the headcount ratios, it should be noted that the workforce figure is the group total at the reporting date and includes the financial services segment and the subsidiaries, so that the ratio is an indicator of corporate productivity rather than a measure of assembly efficiency. More importantly, the perimeter is about to change because of the sale of MHP, which will mean the departure of more than 4,500 employees, and the three closures (more than 500 people), which together represent around 12% of the group's workforce. The published ratio will therefore improve in 2026 and 2027 for reasons that have nothing to do with how efficiently Porsche builds cars, and anyone using it as a productivity measure will need to exclude the effects of the divestments.

In the light of the results presented for the second half and the estimate for the 2026 close, it is also worth highlighting something that management has not explicitly detailed and that could lead to misreadings of the financial reports, and which I was able to observe when transposing the data into a spreadsheet in order to make my own estimates. A return on sales of 6.5% on €35,500 million implies an annual operating profit of approximately €2,300 million, of which €1,350 million was already earned in the first half. The implied second half therefore carries a margin on sales close to 5%, considerably below the 7.8% just reported, since that is where the restructuring expenses fall (Porsche AG, 2026k).

In terms of volume, the composition of the half-year decline is more relevant than its magnitude. Deliveries fell by 16% to 122,306 units, but the company attributes this fall principally to the end of production of the combustion 718, to the electric Macan and to the expiry of tax incentives in the United States. Meanwhile, sales of the 911 rose by 19%, and the Cayenne remained the best-selling range with 38,141 units (Porsche AG, 2026g). By region, China recorded a fall of 32% (in line with what I indicated in my previous article), overseas and emerging markets 18%, Europe (excluding Germany) 14%, North America 13% and Germany 6%. The decline is concentrated in China and in the electric SUV segment.

The Four Questions for 7 October

Since the restructuring has preceded the announcement of the strategy, the Capital Markets Day would be a way of taking the temperature of investors and of their acceptance of what has already been executed. There are four questions that determine whether that clinical examination is passed:

First: whether the reduction of the perimeter translates into a reduction of costs. The sale of MHP, the closure of Cellforce and the exit from Rimac remove complexity and free up management attention, and the last of these operations also generated approximately €1,000 million of cash. In any case, none of them changes what it costs to build a car in Zuffenhausen. Only the measures of the “Future Package” do that, and their savings will only really be appreciable from 2028.

Second: whether the motto “value over volume” translates into a concrete figure beyond a fine slogan, more emotional than financial. Management deferred to 7 October the announcement of the medium-term margin target and, specifically, whether its former range of 10-15% is maintained. Repeating the slogan without restating a quantifiable target at such a strategic conference could be interpreted as meaning that the target is not yet calculable, weakening the credibility of the executive team and its board.

Third question: whether the agreement signed with TCS has been completed. By the 7th, matters such as the duration of the agreement, the scope of any exclusivity or non-compete clause, the safeguards governing Porsche's process data and personnel in relation to other automotive entities within the Tata group, and which competences Porsche retains internally, should already be shared.

And fourth question: whether the promised move into the high-end segment is funded and has a scheduled date. In March, the CEO, Michael Leiters, stated that Porsche was studying higher-margin segments positioned above the two-door sports cars and above the Cayenne (Porsche AG, 2026b). A plan that simultaneously envisages reducing variants and removing thousands of jobs in order to enter higher-margin segments must communicate where the engineering capacity for those new models comes from. Its R&D spending has been reduced by a third in two years, falling from €1,665 million in the first half of 2024 to €1,264 million and subsequently to €1,116 million, which is to say from 9.4% to 7.4% of automotive sales revenue, with the capitalisation ratio down from 67.5% to 43.6% (Porsche AG, 2026t). The income statement is therefore progressively absorbing a greater share of the engineering of the past, while the cash devoted to the future declines, and management has told analysts that investment peaks in 2026 and falls structurally thereafter. A company can improve its margin for several years by spending less, but without ceasing to secure its future competitiveness. The board will have to communicate whether this strategy corresponds rather to an acceleration of short-term returns to investors, or whether, on the contrary, there is a credible roadmap of new products based on investment criteria not yet disclosed.

Conclusion

As I anticipated in my previous article, Europe's institutional design does not give rise to figures such as Lee Iacocca, so the solution must be collective and not individual. Despite this, the Porsche case demonstrates that it is still possible to design and execute the conditions under which a European manufacturer can adapt rapidly in spite of the environment in which it finds itself. Those conditions require strong and cohesive leadership, a compact perimeter, liquidity solid enough to negotiate acceptable terms, and a management willing to book the loss on its own plan before the market penalises it for doing so. Porsche is a paradigmatic case and its conditions are not generic conditions in the sector, which is why VW, even as the largest European manufacturer at present, meets none of them.

Whatever is presented in Stuttgart on 7 October, the penalty for a bad past decision is already written in its accounts. A company that admits its plan was wrong while it still holds €7,300 million in net liquidity retains the right to choose the terms of its own adaptation.

References

Philippe Fèvre (plfevre@comillas.edu) earned his DBA cum laude from Universidad Pontificia Comillas. He holds postgraduate qualifications from Chicago Booth, IE Business School, MIT as well as Universidad Pontificia Comillas. A senior executive and strategic advisor with over 25 years of international experience. His academic research interests include SME leadership, disruptive entrepreneurship, and digital transformation.

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