- China was Porsche’s largest single market in 2023 but now trails North America and Europe.
- Economic woes in China have limited consumer spending on luxury goods.
- Mercedes-Benz has also seen its sales in China fall considerably.
Porsche will reduce the size of its dealership network in China due to declining sales and in a bid to slash costs, soon after revealing its third-quarter global profits had declined 41%.
Like many other European brands, Porsche has been struggling in China as of late. Through the first half of this year, its sales plummeted 33% from 43,832 units to just 29,551. When also accounting for Q3, Porsche’s sales were down 29% in China. That’s a worrying trend for the brand as China had been its biggest market but has now slipped behind North America and Europe.
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Porsche has blamed its declining Chinese sales on the tense economic situation in the country as well as the local focus on value-oriented models.
“China is an incredible challenge, not just for Porsche,” the firm’s chief financial officer Lutz Meschke said. “In the future, we can no longer assume that China will return to where it was for European players.”
Meschke added that economic woes in China have limited spending on luxury goods and said the brand needs to review its product lineup, budgets, and costs, “all with the aim of increasing our flexibility and resilience even further,” he said. “We’re not giving up on the Chinese market but we need to face the facts.”
Porsche has confirmed it will significantly cut its Chinese dealership network and anticipates vehicle sales will stagnate in 2025 compared to this year. It didn’t say how many dealers will be forced to close but Meschke noted the brand’s cost structure will be adjusted for annual vehicle sales of around 250,000, as opposed to the more than 300,000 vehicles it has sold in recent years, Reuters reports.
Mercedes-Benz is facing similar difficulties. The brand’s local sales have dropped 17% from last year, and that’s worrying as in 2023, China accounted for roughly one-third of all new Mercedes sales. The Financial Times notes that margins at the brand have also suffered as it has had to offer incentives to encourage local sales.
