Porsche Cuts Outlook as Aluminium Shortage Threatens Production

Porsche AG, the renowned German luxury sports car manufacturer, has announced a reduction in its sales and profit outlook for 2024 due to an unexpected aluminium alloy supply shortage. This development has sent the company's shares to the bottom of Frankfurt's blue-chip index.

The supply disruption stems from flooding at an unnamed European contractor, which has affected the production of all Porsche models. The situation is so severe that it may lead to shutdowns for one or more vehicle series. The supplier has officially declared force majeure, indicating its inability to meet contractual obligations due to circumstances beyond its control.

Porsche's vulnerability to this single supplier has exposed the company to significant risk, as aluminium body components are used across all its vehicle series. This incident highlights the importance of robust supply chain management in the automotive industry.

Analysts at Bernstein estimate that the flooding, which reportedly occurred at a Swiss supplier, could result in a production loss of at least 10,000-17,400 vehicles in the second half of 2024. This setback is the latest in a series of challenges for Porsche, which has faced difficulties since its successful IPO in September 2022.

"Whether self-inflicted or genuinely outside its control, these have significantly tarnished what had been an extremely successful IPO in September 2022."

Despite the aluminium supplier's warning, Porsche SE, the holding firm of the Porsche and Piech families that controls Volkswagen and holds a blocking minority in Porsche AG, has confirmed its 2024 earnings forecast.

The market reacted swiftly to the news, with Porsche AG shares falling more than 4%, while Volkswagen, which owns the majority of Porsche AG, saw a 1% decline.

In response to the supply shortage, Porsche AG has revised its sales expectations to between 39 billion and 40 billion euros, down from the previous forecast of 40-42 billion euros. The company also lowered its return on sales projection to 14-15%, compared to the earlier estimate of 15-17%.

This supply chain disruption comes at a challenging time for Porsche, as the company faces muted demand in China, with global deliveries down 7% in the first half of 2024. Additionally, Porsche is grappling with low electric vehicle sales, leading to a recent adjustment of its EV ambitions.

As Porsche navigates these challenges, it's worth noting that the company has a rich history of innovation and resilience. Founded in 1931 by Ferdinand Porsche, the manufacturer has produced iconic models like the 911, introduced in 1963, and has achieved remarkable success in motorsports, winning the 24 Hours of Le Mans race 19 times.