Porsche’s billion-dollar loss last week isn’t just a setback for one of the world’s most profitable automakers—it’s a warning shot for the entire luxury economy. After years of record profits fueled by cheap credit and post-pandemic “revenge spending,” the German carmaker’s sudden slowdown shows that even the world’s most coveted brands are losing altitude as global demand cools.
The company reported a €966 million ($1.1 billion) quarterly loss and a 99 percent drop in operating profit for the first nine months of 2025, marking its first decline in years. Porsche blamed weak demand in China, slowing electric vehicle (EV) sales and rising tariff costs. It also announced a pause in its EV expansion and the departure of longtime CEO Oliver Blume from his role at Porsche AG.
Porsche has long been one of the crown jewels of its parent company, Volkswagen Group, which also owns Bentley and Lamborghini. The brand occupies a unique niche in VW’s lineup, combining exclusivity with scale. SUVs like the Cayenne and Macan transformed Porsche from a niche sports-car maker into a global luxury powerhouse.
Profits surged to record highs after the pandemic, buoyed by aspirational buyers who stretched into luxury purchases when credit was cheap and consumer sentiment was high. Now, as those forces unwind, Porsche is facing a reckoning.
Porsche’s China business, which once accounted for nearly 20 percent of its global sales, shrank by more than 20 percent in the first nine months of 2025, Bloomberg reported, amid weak demand and growing competition from local automakers like BYD and Xiaomi. (The company isn’t alone. BMW recently cut its earnings forecast, citing costs tied to China and U.S. tariffs. Aston Martin and Mercedes-Benz have also reported similar headwinds.
Porsche’s EV strategy stalls
Porsche has also scaled back its electrification plans amid sluggish EV adoption, even as rivals like Ferrari prepare to launch their first electric models.
The company had planned to electrify everything from the 718 Boxster to the Cayman. However, in September, Porsche said it had “realigned” its EV strategy after concluding that its previous goals were “overly aggressive.” The company had targeted an 80 percent electric lineup globally by 2030. Its first EV, the Taycan, faced software and battery problems, while the Macan EV—finally available now—was delayed more than a year due to software issues. Porsche now plans to focus more on internal combustion and hybrid models to offset EV losses.
Those EV challenges have weighed heavily on Volkswagen Group’s bottom line. This week, VW reported a $1.5 billion loss in the third quarter, in part due to Porsche’s revaluation of EV assets.
The company’s leadership shuffle adds to the turbulence. Blume, who has served as CEO of both Volkswagen Group and Porsche for the past three years, faced criticism over the dual role and its potential conflicts of interest. He will step down from his position at Porsche but remain CEO of Volkswagen Group, a post he has held since 2015.
Blume is expected to be replaced by Michael Leiters, formerly CEO of McLaren, who will take over Porsche’s day-to-day operations.
The luxury slowdown spreads beyond cars
The broader luxury sector is feeling a similar strain as global economic conditions shift amid geopolitical tensions, rising job losses linked to A.I., and growing backlash against conspicuous consumption.
Bain & Company recently predicted a “normalization” of the luxury market, writing: “The global luxury sector this year confronts its most far-reaching disruptions—and its biggest potential setbacks for at least 15 years—amid mounting economic turbulence and complex social and cultural shifts.”
Major luxury groups like LVMH have seen revenues tumble this year, while Interbrand’s Best Global Brands 2025 report found that the combined value of 13 personal luxury brands fell by 5 percent. On that list, Porsche’s brand value dropped 14 percent year over year.
Even though Porsche isn’t alone in its decline, the message is clear: even the most exclusive brands are not immune to shifting consumer behavior and tightening economic conditions. The question now is whether the power of a name—and the allure of luxury—can endure as the market for aspirational excess runs out of road.
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