Porsche AG said it was ditching plans to make its own battery cells as the German premium-car maker contends with a slow electric-vehicle market, particularly in the U.S. and China.
The group had hoped to expand production of high-performance batteries through its Cellforce Group subsidiary, but said the plans were no longer economically viable. The unit will now become an independent research-and-development hub with a focus on battery cells and system development.
Porsche said the decision would result in job cuts at Cellforce to be implemented in a socially responsible manner, a phrase that in Germany alludes to negotiations with trade unions. The company didn't provide details on how many jobs were at risk, but said affected employees might be offered opportunities to redeploy to PowerCo, Volkswagen's battery business. Volkswagen has a majority stake in Porsche.
"For volume reasons and a lack of economies of scale, Porsche is no longer pursuing its own production of battery cells," Chief Executive Oliver Blume said.
The announcement is yet another setback for Porsche, which has been agonizing over a slow EV market and fierce competition from local carmakers in China for months. Last year, the company scaled back its EV ambitions and said it would expand its portfolio in the coming years to include models with combustion engines and plug-in hybrid powertrains.
Porsche said demand for EVs varied widely across regions. While volumes in the U.S. and China are falling short of expectations, the European market has had disproportionate growth in the first half of the year. Around 57% of vehicles there were electrified in the period, including hybrids.
"With the construction of the factory in Kirchentellinsfurt in 2022, we have set an exclamation mark in the industry and for Germany as a business location," Michael Steiner, member of the executive board for research and development at Porsche, said.
"Unfortunately, the market for electric vehicles worldwide has not developed as originally thought. The framework conditions have changed fundamentally and we have to react to them," Steiner said.
Last month, Porsche cut its guidance for the year once again to reflect the trade agreement between the U.S. and the European Union, as well as potential price adjustments to shield its finances after the company took a hit of around $1.27 billion in the first half due to a host of challenges.
Washington will keep the current 27.5% tariffs on automobiles from the EU until the bloc introduces legislation to reduce levies on a variety of U.S. goods.
Write to Andrea Figueras at [email protected] and to Mauro Orru at [email protected]