German sports-car maker Porsche plans to overhaul its product portfolio to include more combustion engine and plug-in hybrid vehicles, putting additional strain on its already squeezed profit margins.

The Stuttgart-based carmaker said on Thursday night that the current year’s margins were expected to be between 10 and 12 per cent, well below its long-term target of 20 per cent. Further vehicle development and “battery activities” would add another €800 million in costs, it said.

The decision to increase spending on future combustion engine models came as worldwide deliveries to customers last year dropped by 3 per cent against the previous year. The declines were driven by a 28 per cent slump in China, where consumers were not convinced by its electric Taycan.