Porsche joins Tesla in warning about rising interest rates

German luxury brand Porsche (P911.DE) and electric car powerhouse Tesla (TSLA) are coming together in a strange partnership, if only to warn of rising interest rates holding back demand.

After its issuance Financial results for the third quarter to datePorsche warned that inflation and the impact of high rates are a concern.

“Governments have increased interest rates significantly… and this creates a situation where customers are quite hesitant,” he added [to invest in] “A new product,” Porsche CFO Lutz Mischke said in a call with reporters.

Before Porsche’s warning, Tesla CEO Elon Musk criticized the impact of higher rates during the electric automaker’s third-quarter earnings conference call last week.

“If interest rates stay high or if they rise further, it will be difficult for people to buy a car. They simply can’t afford it,” Musk said, repeating several times that high rates, including rising credit card rates, were a major concern. “There will be a broken record on the interest front. It’s just that interest rates have to go down. “If interest rates continue to rise, you basically reduce affordability,” Musk added.

Porsche also warned about an area of ​​major concern for Tesla: China.

“In 2024, we expect a challenging year due to the geopolitical situation and the economy in China.” Meschke Porsche said.

Meschke also had warnings about the larger luxury sector. “It is also hitting the luxury industry – you can follow it when it comes to the evolution of the stock prices of all luxury retailers around the world,” he said, referring to the share prices of luxury brands such as LVMH, Richemont and Kering.

Despite these warnings, Porsche confirmed its expectations for the current fiscal year. Porsche expects global sales revenue to be between 40 and 42 billion euros ($42.3 billion – $44.4 billion), with a return on sales (a measure similar to operating margin) of between 17 and 19%, while cautioning that global economic conditions do not permit this. Exacerbated. In the long term, Porsche said it aims to achieve an operating return on sales of more than 20%.

The story continues

Porsche said high demand and “positive product mix and price impacts” boosted results and its prospects for the rest of the year, with the automaker seeing above-average growth in Europe, North America and emerging markets. Strong sales of the flagship 911 sports car, the Porsche Macan SUV, and an 11% jump in sales of the Porsche Taycan EV, contributed to the results.

For the quarter, Porsche reported revenues during the first three quarters of the year of 30.13 billion euros ($31.8 billion), with operating profits of 5.501 billion euros ($5.81 billion), both higher than the same period last year. Porsche reported a return on sales of 18.3%, which is lower than last year.

Pras Subramanian is a reporter for Yahoo Finance. You can follow it Twitter and on Instagram.

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