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Porsche SE: The Family Empire That Ate Volkswagen (And Then Got Swallowed)
I. The Puzzle of Two Porsches
Walk into any financial terminal and search for "Porsche," and you'll encounter one of European corporate history's most confounding riddles. Two tickers appear: P911 and PAH3. Two companies. One name. A labyrinth of cross-shareholdings that has confounded Wall Street analysts, enriched a family dynasty, triggered the greatest short squeeze in market history, and now stands at the center of Europe's automotive existential crisis.
Since September 29, 2022, traders have been able to buy Porsche AG shares on the Frankfurt stock exchange for €82.50 per Preferred Share under the trading symbol "P911." That initial listing made Porsche's the largest IPO ever carried out in Europe in terms of market capitalization—approximately €78 billion. But this is no ordinary carmaker listing. This is the culmination of nearly a century of family intrigue, corporate warfare, and financial engineering that would make the most complex private equity structures look like child's play.
Porsche Automobil Holding SE, or Porsche SE, is controlled by the Porsche and Piëch families. It serves as Volkswagen Group's top investor with 31.9 percent of shares and 53.3 percent of voting rights. Porsche SE also owns 12.5 percent of carmaker Porsche AG, with most of the rest held by the Volkswagen Group.
The circular logic is dizzying by design. Porsche AG makes sports cars. Volkswagen owns most of Porsche AG. Porsche SE controls Volkswagen. And the same family controls Porsche SE. The hunter became the hunted, which then became the hunter again.
The central question this story answers: How did a boutique sports car maker attempt to swallow Europe's largest automaker—and what happened when the tables turned? The answer involves Nazi Germany, a ruthless short squeeze, a €38 billion emissions scandal, and a family's century-long quest to control the destiny of an industry.
For long-term investors, Porsche SE represents something rare: a publicly traded vehicle to gain leveraged exposure to two of Europe's most storied automotive companies, controlled by one of the continent's wealthiest and most influential families. But that leverage cuts both ways. Understanding how this structure came to be—and where it might be headed—requires going back to the beginning.
II. Ferdinand Porsche: The Engineer Who Changed Everything
On a crisp morning in 1931, an Austrian engineer named Ferdinand Porsche opened the doors to a small consultancy in Stuttgart, Germany. The sign above the door read "Dr. Ing. h.c. F. Porsche GmbH." At 56 years old, Porsche was already a legend in European automotive circles—he had designed the Mercedes-Benz SS and SSK, created the first gasoline-electric hybrid vehicle, and earned a reputation as perhaps the finest automotive engineer on the continent.
Ferdinand Porsche (1875–1951) was a German-Czech automotive engineer and founder of Porsche AG. He is best known for creating the first gasoline–electric hybrid vehicle (Lohner–Porsche), the Volkswagen Beetle, the Auto Union racing cars, the Mercedes-Benz SS/SSK, and several other important developments.
Initially, the company offered motor vehicle development work and consulting but did not build any cars under its own name. Porsche was joined by his son-in-law Anton Piëch, establishing a partnership between two families that would shape European automotive history for the next century.
But the timing of Porsche's independence was fateful. Germany was sliding into chaos. The Weimar Republic was collapsing. And waiting in the wings was a new government with a specific vision for motorizing the German people.
The People's Car
In 1934, Hitler suggested a basic, fuel-efficient vehicle that could transport two adults and three children and whose engine would be powerful enough to traverse Germany's new Autobahnen. The design for a "People's Car" was undertaken by the famed engineer Ferdinand Porsche, who based it on a model he pioneered in 1931. On May 26, 1938, Nazi dignitaries gathered near Fallersleben in northern Germany to lay the foundation stone for the Volkswagen Works.
The commission that would define Porsche's legacy—and forever entangle his family with Volkswagen—had arrived. The Volkswagen (literally "people's car") project gave Porsche's small consultancy an impossible scale and ambition. Ferdinand Porsche personally designed the car that would become the Beetle, the most-produced automobile design in history with over 23 million units manufactured.
After Hitler came to power, Ferdinand Porsche became one of the best-known engineers of the "Third Reich." He took German citizenship, joined the NSDAP, became a member of the SS with the rank of general ("OberfĂĽhrer") and had a good personal connection with the dictator.
The dark chapter cannot be avoided. An important contributor to the German war effort during World War II, Porsche was involved in the production of advanced tanks such as the VK 45.01 (P), the Elefant self-propelled gun, and the Panzer VIII Maus super-heavy tank, as well as other weapon systems, including the V-1 flying bomb. Porsche was a member of the Nazi Party and an honorary OberfĂĽhrer of the Allgemeine SS.
The Volkswagen company operated four concentration camps and eight forced-labor camps on its property. Porsche used forced laborers at the Volkswagen factory, even actively asked for them and was fully aware of their murderous working conditions.
At war's end, Ferdinand Porsche was arrested by the French military and accused of war crimes. However, he was found to be not personally responsible for the use of slave labor, and through the efforts of his family he was released. Porsche spent 20 months in French detention but was never tried.
The Birth of the Sports Car Legend
While Ferdinand languished in French custody, the future of the Porsche name fell to his son, Ferry Porsche. The younger Porsche had a dream: to build a sports car.
Ferdinand Porsche was interned by the French as from December 1945. He was released only in 1947 and was formally exonerated in 1948. During this period, the fate of the company was in the hands of Ferdinand's son, Ferdinand Anton Ernst Porsche, known as Ferry. "In the beginning I looked around and could not find quite the car I dreamed of. So I decided to build it myself."
In the middle of the war, the young company Porsche moved from Stuttgart-Zuffenhausen to Gmünd in Carinthia. The first vehicle to bear the name Porsche was built on the premises of a former sawmill. It was followed by a small series of 356 Coupés and Cabriolets which shaped the unique sports car DNA.
Ferry Porsche recalled: "On this basic idea, we started the first Porsche prototype. To make the car lighter, to have an engine with more horsepower…that was the first two-seater that we built in Carinthia (Gmünd)." The first 356 was road certified in Austria on June 8, 1948, and was entered in a race in Innsbruck, where it won its class.
The 356 established the template that would define Porsche for generations: rear-engine, rear-wheel drive, lightweight, and obsessively engineered. When Ferry Porsche made the decision to build his dream car, he had "very modestly assumed that you could sell about 500 pieces of such a sports car." He would be off by several orders of magnitude.
The family dynasty was now split between two houses: the Porsches in Stuttgart building sports cars, and the Piëchs in Salzburg building a distribution empire. Both would remain bound by blood and business to Volkswagen—Ferdinand's other creation—in ways that would take decades to fully manifest.
III. The Volkswagen Law & Seeds of Future Conflict
When the war ended, the fate of the Volkswagen plant at Wolfsburg hung in the balance. Built by the Nazi regime with funds extracted from workers who never received their promised cars, the factory had been devastated by Allied bombing. The British occupation forces considered dismantling it entirely.
Instead, the British Army tasked Major Ivan Hirst with restarting production to supply transportation for the occupation forces. Against all odds, the "people's car" that Hitler had commissioned began rolling off the assembly line again—this time serving the forces that had defeated the regime that created it.
The Privatization That Changed Everything
When the government-owned Volkswagenwerk GmbH was privatized in 1960 into Volkswagen AG, the German parliament enacted what became known as the Volkswagen Law. This legislation would prove to be one of the most consequential pieces of corporate governance legislation in European history.
The law contained several provisions that fundamentally altered the rules of corporate control: - No shareholder, regardless of stake size, could exercise more than 20% of voting rights - Major decisions required an 80% supermajority (effectively giving any 20%+ holder veto power) - The state of Lower Saxony was granted permanent board representation - Special provisions protected the company from hostile takeovers
For decades, this protective cocoon allowed Volkswagen to operate largely immune from the pressures of activist shareholders and hostile acquirers. Lower Saxony's permanent influence aligned the company with regional employment interests—not necessarily shareholder value maximization.
The Family Connection
Throughout this period, the Porsche and Piëch families maintained their connection to Volkswagen through a web of board seats, business relationships, and shared history. The company that Ferdinand Porsche had designed, and that had provided the mechanical basis for the 356 and its successors, was never far from the family's orbit.
Meanwhile, Porsche AG in Stuttgart was building the sports car legend. The 911, introduced in 1964, became the defining sports car of its era—and every era since. But by the early 1990s, the company faced an existential crisis.
The large drop in the dollar exchange rate, the model policy and the high production costs created problems for the company from 1986 onwards; Porsche was heading for an economic low point. The sports car manufacturer sold 23,000 cars in 1991, half as many as five years previously. Losses added up to 240 million Deutschmarks by the end of 1992. The low point was reached in the fiscal year 1992/1993 with sales of only 14,362 vehicles.
Porsche needed to reinvent itself or face extinction. At the beginning of the decade, the company found itself in one of the most significant economic crises in its history: it was in the red and delivered only 23,060 cars in the 1991/92 financial year. With the Boxster, launched in 1996, Porsche began to manoeuvre its way out of its slump. But it quickly became clear to the management that the legendary 911 and the new mid-engined model alone would not be able to lead the company into a secure future.
Ferry Porsche predicted it back in 1989: "If we build an off-road model according to our standards of quality, and it has a Porsche crest on the front, people will buy it." He would go on to be proved right. Since 2002, the Cayenne has been one of the mainstays of the car manufacturer's global success.
The Cayenne SUV, developed in partnership with Volkswagen (which created the Touareg on the same platform), transformed Porsche from a boutique sports car maker into a highly profitable luxury brand. This collaboration deepened the ties between the two companies—and gave the Porsche family a front-row seat to Volkswagen's strategic challenges.
By the mid-2000s, the Volkswagen Law that had protected VW for decades was coming under attack. The European Court of Justice ruled in October 2007 that the law violated EU principles of free capital movement. Suddenly, the protective barriers around Volkswagen were crumbling.
The families saw an opportunity. What had started as a defensive stake would become something far more ambitious.
IV. The 2007 Restructuring: Birth of Porsche SE
On June 26, 2007, an extraordinary general meeting took place at Porsche headquarters that would reshape the German automotive industry. Shareholders of the old Dr. Ing. h.c. F. Porsche AG gathered to vote on a proposal that, on its surface, seemed like routine corporate housekeeping.
The proposal: transform Porsche from an operating company into a holding company structure. The operating business—designing and manufacturing sports cars—would be spun into a 100% subsidiary. The parent company would be converted into a European Company (Societas Europaea, or SE) called Porsche Automobil Holding SE.
The vote was unanimous. The name "Porsche Automobil Holding" was approved. But this was no mere legal restructuring. It was the construction of a war machine.
The Architecture of Ambition
Porsche SE became a holding company with two primary assets: a 50.1% stake in Porsche Zwischenholding GmbH (which held 100% of the operating car company) and a growing stake in Volkswagen AG.
The families—the Porsches and Piëchs—structured ownership through ordinary and preferred shares, with the families collectively holding all ordinary (voting) shares while preferred (non-voting) shares were traded publicly. This gave the families complete control over strategy while allowing outside investors to participate in the financial performance.
The restructuring served multiple purposes: - It separated the cash-generating car business from the holding company's balance sheet - It created a clean vehicle for accumulating VW shares - It established a structure that could employ significant leverage - It gave the families a platform to pursue their ultimate ambition
And what was that ambition? Nothing less than reversing history—the smaller company swallowing the larger one, the sports car maker taking control of the people's car company.
V. David vs. Goliath: The VW Takeover Attempt (2005-2009)
The Secret Accumulation
By 2006, Porsche had announced that it wanted to boost its shareholdings of VW and did so by acquiring substantially more stock in the company, which, in turn, began pushing the share price higher. As the price continued to rise throughout 2007, many hedge funds held the view that VW stock had become overvalued and increased their short positions.
On March 26, 2007, amidst rumors that hedge funds were trying to acquire VW with the intent to break it up, Porsche took its holding to 30.9%. The company publicly stated it did not intend to take over Volkswagen Group but was merely moving to prevent a competitor from taking a large stake.
By March 2008, Porsche owned 31 percent of Volkswagen and confirmed at the time that it was not looking to increase its holdings to 75 percent, as was widely rumoured.
Behind the scenes, something very different was happening. Through a sophisticated structure of cash-settled options, Porsche was quietly amassing far more than its disclosed stake suggested. The financial engineering was brilliant—and, critics would later argue, deceptive.
October 26, 2008: The Mother of All Short Squeezes
On October 26, 2008, Porsche Automobil Holding SE announced that it owned directly, or had the right under cash-settled options to purchase, 74.1% of Volkswagen's stock. VW's stock price immediately rose on the Porsche announcement. By the time Porsche went public with its VW holdings, plaintiffs' short positions equaled more than 13% of VW's outstanding shares. Because the German State of Lower Saxony controlled more than 20% of VW, only about 6% of VW shares were available for purchase on the open market.
The mathematics were devastating for short sellers. In plain terms, the actual available float went down from 45% of outstanding shares to around just 1% of outstanding shares. Furthermore, the seemingly "low" short interest of 12.8% became a massive supply and demand imbalance. Thus, millions of shares needed to be bought immediately, even though there were simply no shares available to be sold.
Before Porsche's announcement on October 26, 2008, Volkswagen's stock was trading at around €210.85. By October 28, the stock had surged to an astonishing €1,005 per share, representing a nearly 400% increase in just two days. At its peak, Volkswagen's market capitalisation reached approximately €296 billion, briefly making it the world's most valuable company.
This was happening in October 2008—the worst month of the Global Financial Crisis. Lehman Brothers had collapsed six weeks earlier. Markets worldwide were in freefall. And Volkswagen—heavily indebted, selling cars into a collapsing market—briefly became the most valuable company on Earth.
Hedge funds incurred losses estimated at $30 billion, with many describing the event as a financial "bloodbath." The timeline of events underscores the rapid and catastrophic nature of the Volkswagen short squeeze.
On the other side of the trade, the hedge funds who had sold VW short quickly saw their collective losses exceed $30 billion. Hedge fund managers were "literally in tears on the phone" as they described "a nuclear bomb going off in our faces."
The losses hit some of the biggest names in the hedge fund industry. This included David Einhorn of Greenlight Capital, Andreas Halvorsen of Viking Global, Paul Singer of Elliott Management, Glenn Krevlin of Glenhill Capital, and Crispin Odey of Odey Asset Management.
The Tables Turn
As a result of its skillful financial engineering, Porsche netted itself more than $10 billion in profits in a matter of just a few short weeks. It was money that was badly needed by Porsche. Luxury car sales were plunging due to the crisis and Porsche was already saddled with significant debt.
But Porsche had overreached. The company had borrowed heavily to finance its options positions, and as the financial crisis deepened, the capital requirements for completing the takeover became impossible to meet.
Wendelin Wiedeking, the CEO of Porsche, was eventually prosecuted with share price manipulation for his involvement in the short squeeze, but the accusations were later dropped.
The hunter was about to become the hunted.
VI. The Hunter Becomes the Hunted (2009-2012)
By early 2009, Porsche SE's audacious gambit had turned into a trap. The company had accumulated massive debt to finance its options positions, and as the global financial crisis made credit scarce, Porsche found itself in an untenable position.
In August 2009, Porsche SE and Volkswagen AG reached an agreement that represented a complete reversal of fortune. The car manufacturing operations of the two companies would merge in 2011, forming an "Integrated Automotive Group." But the terms revealed who was now calling the shots.
The management of Volkswagen AG agreed to 50.76% of Volkswagen AG being owned by Porsche SE—but in return, Volkswagen AG management would take Porsche SE management positions (ensuring Volkswagen management remained in control), and Volkswagen AG would acquire ownership of Porsche AG, the operating car company.
The company that tried to swallow the giant would itself be digested.
Hedge funds sued Porsche, which may have profited by €6 billion or more, on grounds of market manipulation. The company sought financial assistance in the summer of 2009 from the Emirate of Qatar and Volkswagen itself. Porsche executives were cleared of market manipulation charges in 2016.
The final deal closed on August 1, 2012. Volkswagen AG paid Porsche AG shareholders €5.61 billion for the remaining 50.1% it did not own. The deal was classified as a restructuring rather than a takeover due to the transfer of a single share as part of the transaction—a technicality with significant tax implications.
The Final Structure
The resulting ownership architecture remains one of the most unusual in global corporate history: - Porsche AG (the car company) is owned by Volkswagen AG - Volkswagen AG is controlled by Porsche SE (through 53.3% of voting rights) - Porsche SE now also owns 25% plus one share of Porsche AG's ordinary shares - The Porsche and Piëch families control Porsche SE
The company that Ferdinand Porsche designed—Volkswagen—now owns the company that bears his name. But the families that bear his name control Volkswagen. The circle is complete.
VII. Dieselgate: The Existential Crisis (2015-2020)
In September 2015, the United States Environmental Protection Agency dropped a bombshell that would reverberate through the halls of Wolfsburg, Stuttgart, and every Porsche SE shareholder meeting for years to come.
In January 2017, Volkswagen pleaded guilty to criminal charges and signed an agreed Statement of Facts, which set out how the company's management asked engineers to develop the defeat devices, because its diesel models could not pass US emissions tests without them, and deliberately sought to conceal their use.
The scandal—quickly dubbed "Dieselgate"—revealed that Volkswagen had systematically cheated on emissions tests across approximately 11 million diesel vehicles worldwide. The defeat device software detected when vehicles were being tested and activated emissions controls only during testing conditions. On the road, the vehicles emitted up to 40 times the legal limit of nitrogen oxides.
As of 1 June 2020, the scandal had cost VW $33.3 billion in fines, penalties, financial settlements and buyback costs. VW has had to pay more than 32 billion euros ($37 billion) in vehicle refits, fines and legal costs.
For Porsche SE, as Volkswagen's controlling shareholder, the fallout was severe on multiple fronts. Beyond the direct financial impact on Volkswagen's value, the scandal has cost the carmaker more than 32 billion euros ($38 billion) in fees, fines and legal costs so far. Volkswagen and Porsche SE are already subject to 4.1 billion euros worth of shareholder claims in relation to the crisis, but it could take years before they are resolved.
The scandal fundamentally altered the trajectory of the European automotive industry. Diesel, once positioned as the continent's clean-car solution, became politically toxic. Volkswagen accelerated its pivot toward electric vehicles, committing tens of billions of euros to electrification—a strategic bet that would carry its own challenges in the years ahead.
VIII. The 2022 Porsche AG IPO: Coming Full Circle
Dr. Ing. h.c. F. Porsche AG has successfully crossed the finish line of its initial public offering. With the ringing of the bell at the Frankfurt Stock Exchange on September 29, 2022, Porsche, one of the world's most successful sports car manufacturers, entered a new era with increased entrepreneurial flexibility.
With that initial listing, Porsche became the largest IPO ever carried out in Europe in terms of market capitalization of around 78 billion euros. Porsche AG raised €8.2 billion ($7.9 billion) by offering 99 million shares (100% secondary) at €82.50, the high end of the range of €76.50 to €82.50. Cornerstone investors indicated on 45% of the deal.
The IPO was laden with symbolism. In preparation for the IPO, the share capital of Porsche AG was divided into 911 million shares—50% of which are Preferred Shares and 50% of which are ordinary bearer shares. The trading symbol? P911. Both homages to Porsche's iconic model.
Volkswagen received gross proceeds of €9.4 billion from the sale of the Porsche AG preferred shares in the public offer and €10.1 billion from the sale of 25% plus one ordinary share in the ordinary share capital of Porsche AG to Porsche Automobil Holding SE.
The circular ownership was restored and formalized: - Volkswagen holds 75% minus one share of Porsche AG's ordinary shares - Porsche SE owns 25% plus one share of Porsche AG's ordinary shares - Porsche SE continues to control Volkswagen through 53.3% of voting rights
The IPO opened up greater entrepreneurial freedom for Porsche. The domination agreement and profit and loss transfer agreement with Volkswagen expired at the end of 2022.
For investors, this created an unusual opportunity—and complexity. Buying Porsche SE (PAH3) provides leveraged exposure to both Volkswagen and Porsche AG, controlled by one of Europe's most influential industrial families. The holding company structure creates a discount to net asset value that has historically ranged from 20-40%, reflecting both the illiquidity premium and legal/governance risks.
IX. Current Crisis: The EV Transition Turmoil (2024-2025)
The story that began with Ferdinand Porsche's partnership with Hitler to create the "people's car" has arrived at another inflection point. The automotive industry faces its most significant transformation since the invention of the internal combustion engine. And both of Porsche SE's major holdings are struggling.
Volkswagen reported a net loss of €1.07bn for the third quarter of 2025, compared with net income of €1.56bn in the same period a year earlier. It was the group's first quarterly loss since the second quarter of 2020, when performance was affected by the coronavirus pandemic.
Provisions and impairments related to the realignment of Porsche's product strategy and a goodwill impairment at Porsche resulted in additional charges of around €4.7bn. Volkswagen, which operates 10 brands including Skoda, Seat and Audi, said that the US administration's tariff policy was costing the company about €5bn a year. The company recorded an operating loss of €1.29bn for the quarter.
The China Challenge
Deliveries in the first nine months of 2025 dropped by 26% in China, Porsche's most important luxury market. The Chinese market, which was supposed to be the growth engine for European luxury brands, has instead become a battleground where domestic competitors with superior EV technology and lower costs are taking market share.
The Strategic Retreat
Porsche – 75.4-percent owned by Volkswagen – announced a strategic reversal regarding electric vehicles in September 2025, preferring to bet on hybrids and combustion engines in the short term to win back its traditional customer base. This forced shift led to charges of 4.7 billion euros, dragging down the group's results.
Leadership Change
The Supervisory Board of Porsche AG appointed Dr. Michael Leiters as CEO of Porsche AG, effective January 1, 2026. Dr. Oliver Blume, who led Porsche AG as CEO for ten years, will continue to serve as CEO of Volkswagen Group.
Leiters has been CEO of McLaren Automotive from July 2022 until April 2025, having previously served as CTO for Ferrari for more than eight years. His appointment brings an outsider—albeit one with deep Porsche roots—to address the company's mounting challenges.
Porsche's operating margin has tumbled from double-digits to around 2–3% in 2025. The share price has plunged by more than half since its 2022 IPO. Analysts estimate that returning to healthy profitability could take three to five years.
Volkswagen's Restructuring
Volkswagen Group reached a deal with labor unions, avoiding closure of historic German plants, while planning to cut some 35,000 jobs by 2030. After weeks of negotiations between the Volkswagen Group and the main labor unions in Germany, the automaker struck a deal to avoid outright closures of a number of plants in Germany.
The automaker will reallocate production of some vehicles over the next several years as it preps for an increasingly electrified lineup, with the agreement also reducing the capacity of German plants by 734,000 vehicles.
Volkswagen ended 2024 with 679,472 employees, down about 0.7% from 2023, but the total still dwarfs the 384,338 people that Toyota Motor Corp. had on staff.
For Porsche SE, the crisis flows directly through to its financial results. Despite a challenging market environment, Porsche SE generated an adjusted group result after tax of 1.1 billion euro in the first half of 2025 (prior year: 2.1 billion euro). This figure was significantly influenced by the result from ongoing at equity accounting of the investments in Volkswagen AG and Porsche AG of 1.2 billion euro (prior year: 2.0 billion euro) and 0.1 billion euro (prior year: 0.3 billion euro), respectively.
X. Porsche SE Today: Structure & Diversification
Porsche SE is a holding company with investments in the areas of mobility and industrial technology. The company employed just under 50 people as of 31 December 2024 and generated an adjusted group result after tax of 3.2 billion euro in the fiscal year 2024. As core investments, Porsche SE holds the majority of the ordinary shares in Volkswagen AG and 25% plus one share of the ordinary shares in Porsche AG.
Current Ownership Structure
The ownership is divided between ordinary (voting) and preferred (non-voting) shares. The Porsche and Piëch families collectively hold all ordinary shares through their investment entities, while preferred shares are traded publicly and held mostly by institutional investors.
Key voting stakes: - Volkswagen AG: 53.3% of voting rights (31.9% of equity) - Porsche AG: 25% plus one share of ordinary shares (12.5% economic)
Diversification Strategy
Recognizing the risks of concentration in automotive holdings, Porsche SE has been building a portfolio of technology investments:
Porsche SE is already active in the field of dual-use technologies with its successful investments in Isar Aerospace and Quantum Systems, among others.
In 2024, Porsche SE invested in Flix SE, Waabi and Quantum Systems.
Hans Dieter Pötsch stated: "On our way to becoming a diversified investment platform, we are closely monitoring the areas of defense capability, security and European resilience. With regard to portfolio investments, our aim is to increase our involvement in the defense and defense-related sectors while maintaining our core focus on mobility and industrial technology."
At the beginning of 2025, Porsche SE reserved up to two billion euros for new investments in the defense segment. The company announced it would set up its own platform for defense investments and hold a "Defence Day" to attract potential co-investors.
The defense pivot represents a significant strategic shift. Porsche SE disclosed that it has "successful investments" within the sector, including those in Isar Aerospace and Quantum Systems, among others. Its future defense investments will focus on tech-focused firms such as those that make satellite surveillance, reconnaissance and sensor systems, cybersecurity, and logistics and supply systems.
XI. Strategic Analysis: Powers and Forces
Porter's Five Forces Analysis
1. Threat of New Entrants: MODERATE-HIGH
Traditional barriers to automotive manufacturing—capital intensity, manufacturing expertise, brand heritage—are being disrupted by the EV transition. Tesla proved that a newcomer could build a global automotive brand from scratch. Chinese competitors like BYD have achieved scale and cost advantages that threaten European incumbents. Software-defined vehicles may lower traditional barriers further, though regulatory hurdles remain significant in major markets.
2. Bargaining Power of Suppliers: MODERATE-HIGH
The shift to EVs has concentrated power among battery suppliers and semiconductor manufacturers. Volkswagen and Porsche face challenges from geopolitical tensions affecting supply chains, volatile commodity markets, and the strategic importance of securing battery materials. Vertical integration efforts in battery production have faced setbacks, leaving the group more exposed to supplier power than desired.
3. Bargaining Power of Buyers: MODERATE
In the luxury segment, Porsche AG enjoys some insulation from price sensitivity. Wealthy buyers represent a more stable customer base during economic downturns. However, the proliferation of EV options is expanding customer choices, and Chinese competitors are moving upmarket, challenging traditional luxury pricing power.
4. Threat of Substitutes: HIGH
The fundamental product—the automobile—faces increasing competition from alternative mobility solutions: ride-sharing, public transportation improvements, and urban planning that reduces car dependency. For Porsche specifically, the question is whether electric powertrains can deliver the "emotional thrill" that defines the brand.
5. Competitive Rivalry: VERY HIGH
The automotive industry faces unprecedented competitive intensity. European OEMs compete against Japanese incumbents, Korean challengers, American disruptors, and now Chinese manufacturers with superior cost structures. The EV transition has compressed product cycles and increased R&D requirements while legacy manufacturers carry the burden of ICE overcapacity.
Hamilton Helmer's Seven Powers Framework
Scale Economies: Volkswagen's scale—over 9 million vehicles annually—provides meaningful purchasing power and development cost amortization. But scale also creates inflexibility and excess capacity challenges during transition periods.
Network Effects: Limited direct network effects, though connectivity services and charging infrastructure could create switching costs over time.
Counter-Positioning: Tesla and Chinese EV manufacturers have demonstrated counter-positioning advantages. Legacy manufacturers cannot easily abandon ICE investments and dealer networks, creating structural disadvantage in pure-EV competition.
Switching Costs: Low for vehicles themselves, though brand loyalty and ownership experience create soft switching costs. Service networks and financing relationships add modest friction.
Brand: Porsche possesses one of the strongest automotive brands globally—a genuine power. The 911 remains aspirational after 60 years. Whether this brand translates to electric powertrains is the central strategic question.
Cornered Resource: Porsche's engineering heritage and motorsport pedigree represent specialized knowledge, though whether this constitutes a true cornered resource in the EV era remains uncertain.
Process Power: Porsche's manufacturing quality and engineering precision have historically represented process advantages. The question is transferability to electric vehicle production.
XII. Bull Case and Bear Case
Bull Case
Family Control as Strategic Asset: The Porsche-Piëch family's long-term orientation provides strategic patience unavailable to dispersed-ownership competitors. The families have shown willingness to make bold, multi-decade bets—the VW takeover attempt, the Cayenne launch, the electrification commitment. This long-termism may prove valuable during a transition period requiring sustained investment.
Discount to NAV: Porsche SE is currently trading at a 31.8% discount to NAV, which is expected by some analysts to narrow as legal claim risks diminish. For investors comfortable with the complexity, this provides exposure to Volkswagen and Porsche AG at a meaningful discount to purchasing the underlying securities directly.
Brand Power: The Porsche brand represents genuine pricing power in luxury automotive. Unlike volume manufacturers, Porsche can maintain profitability even with lower unit volumes. The brand transcends any particular powertrain technology.
Restructuring Progress: The "Zukunft Volkswagen" agreement provides a framework for cost reduction and capacity rationalization that, if executed successfully, could restore competitive positioning.
Defense Diversification: The pivot toward defense and dual-use technologies provides exposure to structural growth in European security spending, potentially reducing automotive concentration risk over time.
Bear Case
Structural EV Disadvantage: European OEMs may face permanent cost and technology disadvantages versus Chinese competitors. The EV transition is compressing the advantages of legacy manufacturing expertise and brand heritage.
China Exposure: Deliveries in China dropped 26% in the first nine months of 2025. China represented a major growth driver; its decline pressures both volume and profitability assumptions.
Legal Overhang: Dieselgate liabilities continue to accumulate, with potential exposure reaching billions of euros. The resolution timeline remains uncertain.
Execution Risk: The simultaneous challenges of EV transition, China weakness, tariff impacts, and restructuring create extraordinary execution demands. The dual CEO structure (now ending) added complexity.
Dividend Dependency: Porsche SE relies on dividends from Volkswagen and Porsche AG to service debt. If operating challenges force dividend cuts at either investee, Porsche SE's own financial flexibility would be constrained.
XIII. Key Metrics for Investors
For long-term investors monitoring Porsche SE, three metrics matter most:
1. Discount to Net Asset Value (NAV)
The most important metric for Porsche SE specifically. NAV is calculated as the market value of holdings in Volkswagen AG and Porsche AG, plus portfolio investments, minus net debt. The historical range has been 20-45% discount; significant movements in either direction warrant attention. A narrowing discount may indicate resolution of legal risks or improved sentiment toward holdings; a widening discount may signal concerns about governance, legal exposure, or strategic direction.
2. Volkswagen Group Operating Margin
As the dominant value driver within Porsche SE's portfolio, Volkswagen's profitability trajectory determines dividend capacity and equity value. For the 2025 financial year, Volkswagen expects an operating return on sales between 2% and 3%. This compares to historical levels of 6-8%. Restoration to structural profitability is the key value driver.
3. Porsche AG Return on Sales
Porsche AG's premium positioning should deliver industry-leading margins. The operating margin has tumbled from double-digits to around 2-3% in 2025. Recovery to the mid-teens would indicate successful navigation of current challenges.
XIV. Conclusion: Legacy and Future
Nearly a century ago, Ferdinand Porsche opened a small consulting office in Stuttgart. The company he founded would design the most-produced car in history, create one of the most valuable automotive brands, orchestrate the greatest short squeeze in market history, and ultimately become entangled in one of the largest corporate scandals ever.
The Porsche story is inseparable from the darker chapters of the 20th century—the Nazi regime, forced labor, the instruments of war. Those origins cast a long shadow that the company has never fully escaped and should not be forgotten.
Today, Porsche SE stands at another crossroads. The automotive industry faces its most significant transformation in a century. The family's long-term horizon—a genuine strategic asset—will be tested as never before. The circular ownership structure that emerged from the failed takeover attempt creates both leverage and vulnerability.
For investors, Porsche SE offers something unusual: a publicly traded vehicle providing leveraged exposure to two storied European industrial companies, controlled by a family with century-spanning investment horizons. The discount to NAV provides margin of safety; the structural challenges require patient capital.
The families that control this empire—descendants of Ferdinand Porsche and Anton Piëch—have demonstrated repeatedly that they play games measured in decades, not quarters. They attempted to swallow Volkswagen and were themselves consumed, only to emerge controlling both companies. They have navigated world wars, emissions scandals, and technological disruption.
Whether they can navigate the electric revolution remains the central question. The answer will determine whether the name Porsche continues to define automotive excellence—or becomes a monument to what was once.
This analysis is for informational purposes only and should not be considered investment advice. Past performance does not guarantee future results. Investors should conduct their own due diligence and consult with qualified financial advisors before making investment decisions.
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