Porsche is set to streamline its dealership network in China, responding to persistently weak demand in the world's largest auto market, reported Reuters.

The European carmaker is facing significant pressure on profit margins, leading to a strategic cost reduction initiative.

Porsche CFO Lutz Meschke revealed a 41% decline in third-quarter operating profit, highlighting the company's aim to save billions of euros by 2030.

The company, which is majority-owned by Volkswagen, is adjusting its cost structure to align with an anticipated global annual vehicle sales figure of approximately 250,000 units, a noticeable decrease from the over 300,000 vehicles sold in recent years.

Porsche chief financial officer Lutz Meschke was quoted by the news agency as saying: "China is an incredible challenge, not just for Porsche. In the future, we can no longer assume that China will return to where it was for European players."

Porsche stated that weaker demand in China and a slower-than-expected transition to electric vehicles have compelled it to reassess its product lineup, and costs.

"All with the aim of increasing our flexibility and resilience even further," Meschke added, acknowledging a structural demand shift in China where an economic crisis has affected luxury spending.

Meschke emphasised the need for realism regarding the Chinese market, predicting stagnation in vehicle sales by 2025 as compared to 2024 and confirming significant reductions in the local dealership network.

In the third quarter of 2024, Porsche's operating profit declined 41% to €974m, and sales for the period decreased to €9.1bn, leading to an operating margin of 10.7%. This margin is below the company's medium-term target of 17% to 19%.

Porsche's situation mirrors that of BMW and Mercedes-Benz, both of which are heavily dependent on the Chinese market and are similarly pressured to cut costs.

Mercedes-Benz recently announced intensified cost-cutting efforts following a sharp decline in third-quarter earnings, driven by weak demand and competitive pressures in China.

Despite these challenges, Porsche maintains its 2024 outlook, expecting sales between €39bn and €40bn and an operating margin of 14%-15%.

In the first half of 2024, Porsche's vehicle sales dropped by 7% year-on-year to 155,945 units, with a third of this decline attributed to the difficult Chinese market.

"Porsche plans to reduce dealership footprint in China amid economic challenges" was originally created and published by Just Auto, a GlobalData owned brand.