Porsche stock [ETR:PAH3] has been making heavy going of it over the past six months as the company navigates the changing landscape of global EV markets. Shares are up a mere 0.65% in the six month picture, but the company has been seeing some buying in the market in recent weeks.
BMW shares [ETR:BMW] have been a bit more assertive, with a big rally in the last 30 days or so. BMW stock is up over 4% in the six month timeframe. There has been some profit taking over the course of March however.
Porsche is facing slower sales in China because Chinese buyers don’t see much difference between local and foreign EV brands. European cars are falling behind in terms of fancy tech features inside.
Porsche doesn’t want to just focus on maximum power output, they need to do better marketing explaining why their cars are special, like their handling and control. Asian markets are going to be a key part of future growth strategy, but increasingly we are seeing some interesting competitors coming onto the stage, especially in China.
All eyes on the Porsche K1
“Our experts think Porsche’s new top-of-the-line model, the K1, will be a big deal in the US and China, but not so much in Europe,” said Orwa Mohamad, an analyst with independent equity research house Third Bridge. “They’re not sure how well the 718 will do because people mostly buy it for emotional reasons. It will depend on the car’s performance as an EV.”
Porsche wants to keep making the classic 911 with a regular engine, using things like e-fuels or hydrogen if it’s allowed, but this may be easier said than done. As electric cars proliferate, Porsche needs to start making its own batteries and control more of the value chain to keep costs down and maintain their margins of 15%+. While Porsche can rely on VW, sports cars have different requirements from mass market VW brands.
Pricing pressure will continue in 2024 due to increasing competition from EVs in Tesla and other Chinese automakers, which can cut prices from a strong position on product costs.
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What about BMW then?
As for BMW, Mohamad’s sources say that introducing the Neue Klasse platform may give BMW a chance to achieve a higher margin. However, there are significant uncertainties due to slower-than-expected EV adoption and whether customers will like the cars designed on the new platform.
“Our experts are sceptical about whether BMW can sell 50% of its fleet as BEVs,” Mohamad said. “The European infrastructure is not capable of charging such a huge number of EVs in the foreseeable future.”
Analysts also doubt the effectiveness of the EU’s anti-subsidy probe into Chinese EV imports, citing challenges in transparency over subsidies as well as lower wages and pricing in China’s market. China’s dominance in rare earths for electric motors, controlling about 90% of global resources, could give it significant pricing influence, posing challenges for the German auto industry.
It’s all to play for with both these prominent European motoring brands. The key question is whether fair trade policies will persist as Chinese manufacturers start seeking more of a global footprint.
