The automakers operating profits plunged nearly 93% after scrapping an all-electric vehicle program

German luxury carmaker Porsche AG has reported a sharp drop in operating profits following a costly pivot away from its long-term EV strategy amid mounting challenges facing the EU's auto sector.

The automaker booked extraordinary expenses totaling about €3.9 billion ($4.5 billion) in 2025, which on paper slashed its group operating profits by nearly 93%, from €5.6 billion to just €413 million, according to the company's investor conference presentation released on Wednesday. Battery-related activities cost roughly €700 million, with US tariffs taking a similar toll.

Porsche - until recently the world's most profitable car company by margin - had been developing a new all-electric vehicle platform intended to underpin its models over the next decade. After years of investment, the company has now abandoned the project, returning to combustion-engine models and plug-in hybrids.

"The global challenges and the company's realignment impacted earnings in 2025," Chief Financial Officer Jochen Breckner said, adding that the "recalibration measures will continue to have one-off effects on earnings in the high three-digit million euros range."

The damage has rippled through parent company Volkswagen Group, which reported a sharp drop in net profit. It announced plans to cut 50,000 jobs in Germany by 2030, citing rising energy costs and trade pressures. Porsche faces around 3,900 job cuts.

Porsche said it is "again anticipating very challenging market conditions," noting that in China, the luxury segment remains under pressure, and intense price competition continues to have an impact. The automaker expects geopolitical uncertainties and the US tariff policy to remain in place. It said the potential effects of recent developments in the Middle East have not been factored in.

Germany's automotive sector has been grappling with a growing number of challenges, including surging energy costs, weaker demand, intensifying competition from Chinese manufacturers, and trade tensions with Washington.

The EU energy crisis - sparked by the bloc's drastic reduction of Russian oil and gas imports following the escalation of the Ukraine conflict in 2022 - has further hurt manufacturers. Energy markets have also been impacted by the US-Israeli bombing of Iran and disruptions in the Strait of Hormuz, a key artery for global oil and LNG shipments.

(RT.com)