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Reporter of China Business Network: Dong Tianyi Intern reporter of China Business Network: Liu Xi Editor of China Business Network: Pei Jianru

Several global auto parts giants have begun layoffs and adjustments.

Recently, German auto parts giant ZF announced that it expects to gradually reduce its German employee headcount from the current 54,000 to 14,000 by the end of 2028, accounting for about a quarter of its total German employees.

It is reported that one of the focuses of ZF's strategic adjustment this time is its electric drive technology division. ZF pointed out that the layoff plan is aimed at reducing costs, improving competitiveness, adjusting production capacity according to the continued weak market demand, and freeing up resources for the company's future development in the field of electrification.

Relevant data show that in the first half of this year, the German passenger car market achieved a growth of 5.4% to 1.47 million vehicles, but electric vehicle sales fell 9% year-on-year to 273,700 vehicles, and the market share also fell from nearly 25% in the same period last year to 18.6%. According to the well-known German consulting firm Falkensteg, in the first half of 2024, as many as 20 German auto parts suppliers with annual revenues of more than 10 million euros filed for bankruptcy.

Several auto parts giants are "slimming down"

Public data shows that ZF Group was founded in 1915 and is one of the world's largest automotive parts suppliers. Its main businesses cover mobility products and systems for passenger cars, commercial vehicles and industrial technology. Currently, ZF has about 169,000 employees worldwide, with operations in more than 160 production bases in 31 countries around the world, and a turnover of 46.6 billion euros in 2023.

Image source: ZF official website

The latest financial report data shows that in the first half of this year, ZF's sales were 22 billion euros, close to the same period last year; the total adjusted EBIT was 780 million euros, and the adjusted EBIT margin was 3.5%. In addition, as of June 30, ZF's liquidity was 7.5 billion euros.

ZF said that taking into account the market situation, the group adjusted its sales forecast for 2024 to between 42.5 billion euros and 43.5 billion euros, and the adjusted EBIT margin remained as previously expected at between 4.9% and 5.4%.

In fact, up to now, many multinational parts suppliers have announced layoffs, including Freya Group, Continental, Bosch, etc. As of the end of July 2024, dozens of large global auto parts manufacturers have announced layoffs, with a total of more than 40,000 layoffs, mainly covering European countries such as Germany and France.

As early as February this year, Freia, the largest automotive parts supplier in France, planned to launch a new five-year "EU-Forward" plan (European First Plan) to cut costs and eliminate up to 10,000 jobs in Europe in the next five years; at the same time, German parts supplier Continental announced that it plans to eliminate and optimize 1,750 automotive business R&D positions and 5,400 administrative positions by 2025, a total of about 7,150 layoffs; Bosch plans to lay off 1,200 employees by 2026, including 950 in Germany.

The automotive supply chain landscape is changing

Some believe that the reason behind the layoffs and adjustments of many auto parts manufacturers may be the rise of the new energy vehicle market. According to the China Passenger Car Association, global sales of new energy vehicles will reach 14.28 million units in 2023, and the Chinese market will account for 63.5% of the market share with sales of 8.87 million units. In terms of penetration rate, in 2023, China's new energy vehicle market share will reach 31.6%, an increase of 5.9 percentage points from the previous year; during the same period, the global penetration rate of new energy vehicles reached 22%.

CITIC Securities reported that in the new energy vehicle supply chain, upstream core component suppliers play a vital role, among which batteries, motors, and electronic controls are the core components of the new energy vehicle power system. In addition, with the hot track of autonomous driving and the trend of automobile intelligence, components such as LiDAR have begun to become an important part of the industry chain.

Some industry insiders believe that as the global automotive industry transforms from traditional internal combustion engines to electrification, demand for engines, transmissions, etc. is weakening, and the number of jobs required in these areas is decreasing.

In addition, the influence of Chinese auto parts companies in the global market is gradually increasing, and their share in the global market is rapidly increasing. According to the 2024 Global Top 100 Auto Parts Suppliers List, there are 15 Chinese companies on the list, two more than last year; and CATL ranks fourth, only behind Bosch, ZF and Magna International, the three traditional auto parts giants.

In response to market changes, auto parts companies have also begun to adjust. In the first half of this year, ZF Group launched a strict cost-cutting plan to reduce high debts and prepare for the transition to electric vehicles after 2026, and plans to invest billions of dollars in the transition process. ZF Group CEO Holger Klein said: "Electric vehicles are the future development direction of the global auto parts industry. ZF Group will increase investment in this field and establish partnerships with other companies."

For the Chinese market, parts suppliers have also chosen to continue to increase their investments. Take Bosch as an example. In the second half of 2023, the new plant of Bosch Hydrogen Power Systems (Chongqing) Co., Ltd. and the Bosch Huayu Yantai Phase IV project will be put into production one after another; by the middle of this year, the first phase of Bosch's new energy vehicle core components and autonomous driving R&D and manufacturing base in Suzhou will also be completed.

Image source: Daily Economic News data map

Relevant reports show that in 2023, the revenue of China's auto parts manufacturing industry will be about 4195.3 billion yuan, a year-on-year increase of 3.16%. In terms of market size, from 2017 to 2022, the scale of China's auto parts market has increased from 3.7 trillion yuan to 5.4 trillion yuan, and it is expected to reach 7.8 trillion yuan by 2027.