How Porsche Became Volkswagen's Problem Child

On September 18, Volkswagen did something that would have been unthinkable five years ago. It cut its profit forecast because of Porsche.

The group now expects an operating margin of 1% at most this year, down from 4% to 5.5%, and about €6 billion ($6.9 billion) of the €10 billion ($11.5 billion) in one-off charges behind that warning is a non-cash write-down of Porsche's value. The brand that earned an 18% margin as recently as 2023 earned 1.1% last year. The day after the warning, the German business daily Handelsblatt reported that Volkswagen's restructuring documents propose about 4,100 more Porsche job cuts, on top of roughly 9,000 already agreed. Porsche declined to comment.

The easy version of this story is that Porsche got greedy. The truer version is stranger. Nearly everything that is hurting Porsche now was once the thing that saved it.

The first time Porsche nearly died

In the mid-1980s, Porsche sold more than 50,000 cars a year. By 1993, it sold about 14,000. In the United States, its most important market, it moved just 3,713 cars that year. Its losses had reached 240 million Deutschmarks (about $154 million at the time, roughly $355 million in 2026) by the end of 1992.

The problem was the lineup. Porsche had spent nearly two decades trying to build a second car next to the 911, and every attempt shared almost nothing with it. The 924, 944, 928 and 968 were each their own engineering project, with their own parts and their own tooling. The company was essentially hand-building several small product lines at once, and when the recession of the early 1990s arrived, the arithmetic stopped working.

The Toyota men

The rescue came from an unlikely direction. In 1992, under Wendelin Wiedeking, who would soon run the company, Porsche brought in former Toyota engineers who knew the Toyota Production System and its just-in-time manufacturing. The Stuttgart factory had been built around craftsmanship and warehouses full of parts. The consultants treated it like a waste problem. Some workers took the arrival of Japanese efficiency experts as an insult. It worked anyway.

The product answer was two cars designed as one. The Boxster concept debuted at the Detroit auto show in January 1993 to the kind of reception that makes a board approve a production car. Behind it, the next 911, the water-cooled 996, was developed at the same time and on the same principles. The two shared their front ends, doors, much of their interiors and their engine architecture. The shared development reportedly cut costs by about 30%, and the famous "fried-egg" headlights that purists still complain about were the most visible sign of the bargain.

The Boxster was meant to double Porsche's production to about 30,000 cars. It did far better than that, to the point that Porsche contracted Valmet in Finland to build overflow cars. The first generation ended up selling 164,874. The 996 followed and replaced the air-cooled 911 that many enthusiasts believed could never be replaced. Porsche had saved itself by getting smaller and smarter: fewer unique parts, less waste, more cars from the same money.

The third Porsche

The Boxster and the 996 stopped the bleeding. They did not make Porsche safe. Management concluded that two sports cars could not carry the company into the future, and the answer was the one thing a sports car company was never supposed to build.

The Cayenne was developed with Volkswagen under a joint program code-named Colorado, officially announced in June 1998. Porsche engineered the shared platform at its then-secret site in Hemmingen; Volkswagen brought its expertise in high-volume production and built its own version, the Touareg. Volkswagen planned to build both in Bratislava, Slovakia, but Wiedeking wanted the Cayenne built in Germany, so Porsche built an entirely new plant in Leipzig. It opened on August 20, 2002, and the first Cayenne rolled off the line the same day. The car was revealed at the Paris Motor Show a month later.

Purists called it a betrayal. Buyers called it a Porsche. In its 2007–2008 financial year, the Cayenne outsold the 911 by about 50,000 cars. It reached 1 million units in 18 years, a number that took the 911 more than half a century. In Porsche's own words, the SUV "helped to pull the company out of a crisis." By 2022, SUVs were the company. The Cayenne and the smaller Macan together accounted for about 59% of every Porsche delivered.

The hedge fund that also made cars

Success made Porsche bold, and then it made Porsche reckless. From 2005, Porsche's holding company, Porsche SE, quietly began buying Volkswagen shares and options, a company that built something like 50 times as many cars. On Sunday, October 26, 2008, weeks into the financial crisis, it announced that it controlled about 74% of Volkswagen's voting rights.

The market had been betting against Volkswagen's stock, and suddenly there were almost no shares left to buy back. VW's share price went from €211 on the Friday to more than €1,000 by Tuesday. For a few hours, Volkswagen was the most valuable listed company in the world.

It was the high-water mark. Porsche SE had financed the stake with debt that it could no longer refinance in the middle of a credit crunch. By 2009 it owed about €9 billion (about $12.5 billion at the time, roughly $19 billion in 2026), and the small company that had tried to swallow the big one got swallowed instead. Wiedeking stepped down in July 2009. That December, Volkswagen bought 49.9% of Porsche's car business for €3.9 billion (about $5.6 billion then, roughly $8.5 billion in 2026), and it completed the takeover in 2012. The twist is that the Porsche and Piëch families, through Porsche SE, remained Volkswagen's largest shareholders. They lost the battle and still ended up owning the winner.

China, and the peak

Inside Volkswagen, Porsche became the profit engine it had always wanted to be. In 2015, China became its largest single market. In 2021, Porsche delivered 301,915 cars worldwide, and 95,671 of them, nearly a third, went to Chinese customers. Dealers there reportedly paid premiums just to secure allocation. In September 2022, Volkswagen floated Porsche AG on the Frankfurt stock exchange, the largest German listing in decades.

Then China turned. Deliveries there fell four years in a row, to 41,938 in 2025, and fell another 32% in the first half of 2026, to 14,501. In the first half of 2026, Porsche sold more cars in Germany than in China, and Germany is on course to outsell China over a full year for the first time since at least 2014. Its Chinese dealer network is being cut from about 150 outlets in 2024 to roughly 80 by the end of this year, and its own charging network in China, about 200 stations, began closing in March.

The reasons are not mysterious. China's luxury market weakened with its economy, and Chinese brands such as BYD, Xiaomi and Huawei's partners began offering wealthy buyers electric cars with better software, more technology and lower prices. A Porsche badge used to be the status symbol. In China, it increasingly competes with cars that do more for less.

The electric bet

At the same time, Porsche was betting on the future harder than almost anyone. The Taycan arrived in 2019 and was a genuine engineering triumph; through the first nine months of 2021 it even outsold the 911. In 2022, the year of the listing, Porsche said it wanted more than 80% of its new cars to be fully electric by 2030. The Macan, its best-seller in many markets, went electric.

Demand for expensive electric performance cars did not grow the way the plan assumed, in China or anywhere else. Taycan deliveries fell 22% in 2025. In the same year, Porsche reversed course, extending gasoline and hybrid models and slowing its electric program, and it paid heavily for the change of mind. It booked about €3.9 billion ($4.5 billion) in one-off charges in 2025: roughly €2.4 billion for resetting its product strategy, €700 million tied to battery activities and €700 million in US tariffs. Operating profit fell from €5.64 billion ($6.5 billion) to €413 million ($474 million).

And then it landed on Volkswagen

That is the chain of events that reached Wolfsburg on September 18. Porsche, which Volkswagen owns 75.4% of, updated its long-term plans, the plans no longer supported the value on Volkswagen's books, and the difference became a €6 billion impairment. Finance chief Arno Antlitz wrote to staff that "we have no time to lose," citing a 20% contraction in China and electric cars that earn thinner margins. Porsche AG's own shares have fallen far enough that it was dropped from Germany's main DAX index.

The new man in charge is Michael Leiters, who became Porsche's chief executive on January 1. He has already abandoned his predecessor's ambition of selling 350,000 to 400,000 cars a year, called the first restructuring package insufficient, and adopted a phrase Porsche now uses constantly: value over volume. It means deliberately building fewer cars than people want, to protect prices and the badge.

The case for Porsche

It would be easy to write Porsche's obituary. It would also be premature. North America remains its largest market, and demand for the 911 in particular has never been the problem. Porsche's own guidance calls for its margin to recover to 5.5% to 7.5% this year, even after further restructuring costs and about €700 million in tariffs. A 5% margin is terrible for Porsche. It would be respectable for most carmakers. And unlike in 1993, Porsche is not short of customers; it is short of the right plan for the ones it has.

There is even an argument that the reset is healthy. A Porsche that sells fewer, more expensive, more desirable cars is closer to what the brand was meant to be than one chasing 400,000 sales a year through Chinese dealerships.

The case against

The trouble is that the things that made Porsche huge are the same things now hurting it. The SUVs that financed everything are exposed to exactly the buyers who are defecting to Chinese brands. The electric Macan was supposed to be the future of its best-selling model line at the moment buyers stopped paying for that future. And China was not a side market that went soft; it was nearly a third of the business. Replacing that volume with higher prices elsewhere is a hope, not a strategy, and the US tariffs make the most promising alternative more expensive to serve.

The lesson from 1993

The last time Porsche was in this much trouble, it did not save itself by growing. It saved itself by getting disciplined: sharing parts, cutting waste, building two cars for the price of one and admitting that the old way of doing things had become unaffordable. The Boxster and the 996 were not the cars purists wanted. They were the cars that kept the purists' favorite company alive.

The Cayenne then turned survival into prosperity, and prosperity into ambition, and ambition into a takeover bid, a stock-market listing, a Chinese dealer boom and an all-in electric plan. Every step made sense at the time. Every step made Porsche bigger, and more dependent on things it could not control.

Porsche is no longer the company that nearly died in 1993. It is not the company that briefly made Volkswagen the most valuable business on Earth, either. What it is now, for the first time in a generation, is the part of the family that needs help. The question is whether it still remembers how it helped itself the first time.