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Porsche admits EV investment to take on Tesla is an “enormous burden”

Published

8 years ago

November 3, 2017

Gene

It’s no secret that Porsche is looking to soak up market share away from Tesla when the automaker releases its long range, all-electric Mission E in 2019. Arguably one of Tesla’s strongest potential competitors, with decades of manufacturing expertise and support from parent company Volkswagen AG, the German automaker specializing in high performance vehicles is preparing to face financial headwinds as it aims to electrify its fleet.

Porsche’s CFO, Lutz Meschke, recently spoke with Automotive News Europe about the company’s plan to stay profitable as it invests billions into its electric vehicle program.

“Today Porsche packs 8,000 to 10,000 euros in added content into an electrified vehicle, but those costs cannot be passed on via the price. The customer won’t accept it, just the opposite, in some parts of the world there’s a certain hesitation,” said Meschke in his interview with Automotive News Europe.

As Porsche looks to invest more than 3 billion euros ($3.5 billion USD) into the development of EVs and plug-ins, the automaker will continue to build internal combustion engine vehicles in parallel and implement company-wide cost-cutting measures to retain its profit margin. “That’s an enormous burden for a company of our size.” says Meschke.

“To protect your margin, you have to look at substantial fixed cost cuts, but there’s only so much potential since the biggest chunks are personnel and development. As sales shift toward EVs, a temporary drop in profitability in the midterm may be expected.”

For context, Porsche’s investment into its EV program amounts to roughly 70% of what Tesla’s Gigafactory will cost when complete. It’s a massive undertaking that Porsche admits will require company restructuring along with financial incentives to its workforce. “We need to structure the company so that it is in position to sustainably achieve that. There can always be years when it might drop to below 15 percent due to exchange rates or an economic crisis, but every worker has to know we are not letting up.” says Porsche’s CFO. “There’s even a pension component.”

By setting a fixed margin target of 15% on a company-wide basis, Porsche’s entire workforce is able to work towards a single goal as looks to maintain a steady CapEx and R&D ratio. “It’s better for Porsche to work with a fixed margin target. It’s really an internal steering instrument. That’s why everyone in the company from the manager to the assembly line worker knows the goal is 15 percent. If we work with a range, that effect is diluted.”

Porsche Mission E concept rendering

When asked by Automotive News Europe on whether Porsche will need to implement a deep cost-cutting program to maintain the company’s high margins, Meschke responded “Under our Porsche Improvement Process, we aim for annual savings of at least 3 percent in indirect areas and 6 percent in direct ones.” Moreover, Porsche’s exec notes that the company performs a cross-department review each year to see if they were able to maintain a 10% savings. “There can always be a time when we need to pull on all levers, but identifying and extracting efficiencies is our everyday business. That way we don’t have to resort to major savings programs at the slightest headwind.”

Maximizing efficiencies across the organization is something Tesla CEO Elon Musk has long talked about. By “building the machine that builds the machine“, Tesla looks to utilize an army of manufacturing robots to achieve mass volume production of its product line that consists of vehicles, solar products and battery storage solutions. It’s the company’s key differentiator over other manufacturers that largely have robots augmenting human personnel as opposed to replacing them.

The goal to achieve full automation is Tesla’s biggest strength, yet also the company’s weakest link, as made evident when Musk announced that production of its mass market-intent Model 3 vehicle was facing issues. The downside to implementing a highly automated production line is the need to have robots that work in perfect harmony with one another. Any misconfiguration or general issue around a specific machine in the process becomes amplified across all other machines that rely on it. There’s less tolerance for errors in an automated process, explained Musk during the company’s third-quarter earnings call.

Porsche’s strategic entry into a market that’s been largely dominated by Tesla is an interesting match up that pits David versus Goliath. With two very different approaches to reaching mass volume production from two very distinct companies, it’s anyone’s guess who’ll come out ahead in the race to electric mobility. Regardless, competition helps stimulate innovation, productivity and growth prospects in the electric car sector, and that can only be a good thing.

Related Topics:Elon Musk Featured Porsche Tesla

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News

Tesla recalls 6,197 Cybertrucks for light bar adhesive issue

On October 20, Tesla issued a voluntary recall of the impacted vehicles and has identified 619 warranty claims and just a single field report that is related to the issue.

Published

24 seconds ago

October 30, 2025

Joey Klender

Credit: Francisco Garcia (via Greggertruck on X)

Tesla has recalled 6,197 Cybertrucks for a light bar adhesive issue that was utilized by Service to install the aftermarket part.

According to the National Highway Traffic Safety Administration (NHTSA), impacted vehicles may have had the light bar “inadvertently attached to the windshield using the incorrect surface primer.”

Tesla identified an issue with the light bar’s adhesion to glass back in February and worked for months to find a solution. In October, the company performed chemical testing as a part of an engineering study and determined the root cause as the BetaPrime primer it utilized, figuring out that it was not the right surface priming material to use for this specific application.

On October 20, Tesla issued a voluntary recall of the impacted vehicles and has identified 619 warranty claims and just a single field report that is related to the issue.

The component is manufactured by a Romanian company called Hella Romania S.R.L., but the issue is not the primer’s quality. Instead, it is simply the fact that it is not the correct adhesive for this specific type of application.

Tesla says there are no reports of injuries or deaths due to this issue, and it will be resolved. In the 473 report that the NHTSA released this morning, Tesla said:

“At no charge to customers, Tesla will inspect the service-installed optional off-road light bar accessory for delamination or damage and if either is present, replace the light bar with a new light bar adhered with tape and a positive mechanical attachment. If no delamination or damage is present, Tesla will retrofit the service-installed optional off-road light bar accessory with a positive mechanical attachment.”

This is the third recall applied to Cybertrucks this year, as one on March 18 highlighted the potential for exterior trim panels to detach while driving, and another earlier this month when the NHTSA said its front parking lights were too bright.

Tesla resolved the first with a free assembly replacement, while the headlight issue was fixed with an Over-the-Air software update earlier this week. Owners said there was a noticeable difference in the brightness of the lights now compared to previously.

Investor's Corner

Tesla investor Calpers opposes Elon Musk’s 2025 performance award

Musk’s 2025 pay plan will be decided at Tesla’s 2025 Annual Shareholder Meeting, which will be held on November 6 in Giga Texas.

Published

1 hour ago

October 30, 2025

Simon Alvarez

Credit: Tesla China

One of the United States’ largest pension funds, the California Public Employees’ Retirement System (Calpers), has stated that it will be voting against Elon Musk’s 2025 Tesla CEO performance award.

Musk’s 2025 pay plan will be decided at Tesla’s 2025 Annual Shareholder Meeting, which will be held on November 6 in Giga Texas. Company executives have stated that the upcoming vote will decide Tesla’s fate in the years to come.

Why Calpers opposes Musk’s 2025 performance award

In a statement shared with Bloomberg News, a Calpers spokesperson criticized the scale of Musk’s proposed deal. Calpers currently holds about 5 million Tesla shares, giving its stance meaningful influence among institutional investors.

“The CEO pay package proposed by Tesla is larger than pay packages for CEOs in comparable companies by many orders of magnitude. It would also further concentrate power in a single shareholder,” the spokesperson stated.

This is not the first time Calpers has opposed a major Musk pay deal. The fund previously voted against a $56 billion package proposed for Musk and criticized the CEO’s 2018 performance-based plan, which was perceived as unrealistic due to its ambitious nature at the time. Musk’s 2018 pay plan was later struck down by a Delaware court, though Tesla is currently appealing the decision.

Musk’s 2025 CEO Performance Award

While Elon Musk’s 2025 performance award will result in him becoming a trillionaire, he would not be able to receive any compensation from Tesla unless aggressive operational and financial targets are met. For Musk to receive his full compensation, for example, he would have to grow Tesla’s market cap from today’s $1.1 trillion to $8.5 trillion, effectively making it the world’s most valuable company by a mile.

Musk has also maintained that his 2025 performance award is not about compensation. It’s about his controlling stake at Tesla. “If I can just get kicked out in the future by activist shareholder advisory firms who don’t even own Tesla shares themselves, I’m not comfortable with that future,” Musk wrote in a post on X.

News

Tesla Cybercab is heading to China’s import expo

The event will take place from November 5–10 at Shanghai’s National Exhibition and Convention Center.

Published

2 hours ago

October 30, 2025

Simon Alvarez

Credit: Tesla Europe & Middle East/X

Tesla will make its return to the China International Import Expo (CIIE) this November, marking its first appearance at the event since 2022. The U.S. electric vehicle maker confirmed it will showcase its highly anticipated Cybercab, which will make its Asia-Pacific debut during the event.

The expo will take place from November 5–10 at Shanghai’s National Exhibition and Convention Center.

Tesla Cybercab in China

Tesla announced its participation in the event on its official Weibo account. As per the electric vehicle maker, it would be occupying Booth A3-03 in Hall 2.1 at the National Exhibition and Convention Center. As noted in a CNEV Post report, the Cybercab, the company’s dedicated autonomous two-seater Robotaxi, will be making its Asia-Pacific debut at the CIIE as well.

The company shared a graphic on Chinese social media which showed an image featuring several Tesla products, such as the Cybercab, Optimus, and Megapack batteries. The graphic also featured a building that read “Master Plan Part IV.”

Tesla’s momentum in China

Tesla’s return comes after skipping the event last year. Interestingly enough, Tesla attended the event from 2018 all the way to 2023. Tesla’s return to the CIIE then aligns with the company’s efforts to attract consumer interest in the world’s most competitive electric vehicle market.

The Cybercab’s presence in the event could suggest that Tesla might be interested in bringing its Robotaxi to the country. This is quite interesting as China is already home to several autonomous ride-hailing services, though Tesla’s pure vision approach, which focuses on artificial intelligence and cameras, is quite unique. So far, Tesla has only rolled out its autonomous ride-hailing services in Austin, Texas, and the Bay Area, California.