Porsche joins Tesla in warning about high rates
German luxury brand Porsche (P911.DE) and EV stalwart Tesla (TSLA) make strange bedfellows, unless it comes to warning about high interest rates crimping demand.
Following the release of its year-to-date Q3 financial results, Porsche warned that inflation and the effect of high rates were a concern.
"Governments increased interest rates heavily ... that creates a situation where customers are quite reluctant [to invest in] a new product," Porsche CFO Lutz Meschke said in a call with reporters.
Prior to Porsche's warning, Tesla CEO Elon Musk railed against the effect of high rates during the EV maker’s Q3 earnings conference call last week.
“If interest rates remain high or if they go even higher, it's that much harder for people to buy the car. They simply can't afford it,” Musk said, repeating multiple times that higher rates, including high credit card rates, were a big concern. “There’s going to be a broken record on the interest front. It's just the interest rates have to come down. Like if interest rates keep rising, you just fundamentally reduce affordability,” Musk added.
Porsche also warned about a region that is of high concern to Tesla: China.
“In 2024, we expect a challenging year due to the geopolitical situation and the economy in China,” Porsche’s Meschke said.
Meschke also had warnings for the larger luxury sector. "It is also hitting the luxury industry — you can follow it when it comes to share price development of all luxury retailers worldwide," he said, alluding to the share prices of luxury brands like LVMH, Richemont, and Kering.
Despite these warnings, Porsche confirmed its forecast for the current financial year. Porsche expects global sales revenue in the range of 40 to 42 billion euros ($42.3 billion - $44.4 billion), with a return on sales (a metric similar to operating margin) of 17-19%, with the caveat that global economic conditions do not worsen. In the long run, Porsche said it is aiming for an operating return on sales of more than 20%.
Porsche said high demand and “positive product mix and price effects” boosted results and its prospects for the rest of the year, as the automaker saw above-average growth in Europe, North America, and emerging markets. Strong sales of the flagship 911 sports car, Porsche Macan SUV, and an 11% jump in sales for the Porsche Taycan EV boosted results.
For the quarter, Porsche reported revenue through the first three quarters of the year of 30.13 billion euros ($31.8 billon), with operating profit of 5.501 billion euros ($5.81 billion), both higher than the same period last year. Porsche reported a return on sales of 18.3%, which was lower than a year ago.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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