Porsche Wants To Increase Profits Despite Lower Returns On Electric Cars

Porsche has a plan to boost its operating profit by 6 billion euros ($6.8 billion) over the next eight years by streamlining its operations among increased spending on the development and production of electric vehicles, according to a report from Bloomberg.

The German car maker’s plan is to increase its earnings before interest and taxes by around 750 million euros ($850 million) annually, starting this year and running through 2025. This will reportedly come to fruition by becoming more efficient in its operation, cutting costs and boosting earnings from other ventures such as digital offerings, according to people with knowledge of the matter.

The profit increase is apparently essential in retaining the company’s target of 15 percent return on sales. With VW Group spending heavily into becoming a leader in electromobility and autonomous technologies, keeping returns flowing is key.

Battery-electric cars offer lower profits to manufacturers compared to vehicles with combustion engines; for example, the upcoming Porsche Taycan is going to cost 6,000 to 10,000 euros more to produce than a comparable model with a traditional engine. The extra cost won’t be passed on to the customers, as the company is looking for savings elsewhere to maintain profitability.

Porsche, which is investing more than 6 billion euros ($6.8 billion) through 2022 on electric cars, is expecting to improve its profit by about 2 billion euros ($2.3 billion) annually after 2025. As VW Group’s most profitable brand, Porsche has made 4.1 billion euros ($4.65 billion) in operating profit and 23.5 billion euros ($26.6 billion) in revenue last year.