BERLIN (Reuters) - Porsche AG shares fell 7% in early Friday trade after the luxury carmaker forecast a preliminary profit margin of 10%-12% for 2025, far below expectations, as it struggles to boost flagging sales and weak demand in China.

The forecast was a "major concern" for the carmaker, said Bernstein Research analyst Stephen Reitman, after its executives touted 17%-19% as its mid-term margin target at its stock market debut in 2022.

Porsche AG said in a statement late on Thursday that it plans to launch new combustion engine and plug-in hybrid models, the latest carmaker to pivot back towards combustion engine vehicles amid low demand for EVs in Europe and intense competition in China from local rivals.

The costs of vehicle development, and battery-related expenses at a subsidiary, would knock about 800 million euros ($830 million) off 2025 operating profit, the company said.

Porsche in October 2024 invested 60 million euros in struggling German battery maker Varta ( VARGF ) to secure access to high-performance batteries.

SLUMPING SHARES

Porsche AG's stock market valuation has tumbled since its listing, with shares slumping 27% in 2024.

The company said last week it was in talks to end the contracts of its chief financial officer and sales chief early, after both came under heavy criticism for the company's poor performance and weak share price.

While 75% of the carmaker's share capital is owned by Volkswagen AG, just over 12.5% is held by Porsche SE, an investment firm controlled by the Piech and Porsche families and which is also the top shareholder of Volkswagen.

Porsche SE said on Thursday it expects impairments on its stake in Porsche AG nearly double the size of its December forecast, reaching 2.5 billion euros to 3.5 billion euros.

The holding firm also said it expects writedowns related to Volkswagen, which is undergoing major cost cuts, towards the upper limit of its forecast range of 7 billion to 20 billion euros.

($1 = 0.9633 euros)