Analysis of the Impact of Profit Margin Pressure on Automotive Parts Suppliers on the Valuation of Hong Kong-listed Automotive Sector

Based on the collected data and analysis, I have prepared this in-depth report on the impact of profit margin pressure on automotive parts suppliers on the valuation of the Hong Kong-listed automotive sector.

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Bosch Group, the world’s largest automotive parts supplier, is facing unprecedented financial pressure. According to the latest disclosed internal email data [1], Bosch Group’s 2025 profit margin is expected to be “significantly below 2% of sales”, far lower than 2024’s 3.5% and 2023’s 5.3%. This means that in just two years, Bosch’s earnings before interest and taxes (EBIT) margin has dropped by more than 3 percentage points, a decline of over 60%.

The core reason for the sharp decline in profit margin is the

, mainly used for the provision of layoff reserves [1]. This figure reflects that Bosch is undergoing a profound business structure adjustment. It is worth noting that this sales figure includes approximately €4 billion in revenue contributed by the group’s acquisition of related businesses from Johnson Controls and Hitachi. If we exclude this incremental revenue from mergers and acquisitions, Bosch Group’s actual organic revenue in 2025 is actually on a downward trend.

Bosch’s predicament is not an isolated case, but a microcosm of the global automotive parts industry. According to the 2025 Global Automotive Parts Supplier Study jointly released by Roland Berger and Lazard [2], the global automotive parts industry is experiencing a “stagnant transformation period”, with the industry-wide EBIT margin dropping from approximately 7% before the pandemic to approximately 4.7% in 2024, a decrease of about 25% in absolute terms.

In terms of regional distribution, profitability varies significantly across regions:

• Chinese Suppliers
  : Maintain the healthiest EBIT margin (5.7%)
• European Suppliers
  : Face the most severe situation (3.6%)
• South Korean Suppliers
  : Also face significant pressure (3.4%)
• North American Suppliers
  : Remain basically unchanged (3.9%)
• Japanese Suppliers
  : At a medium level (4.7%)

European parts suppliers have been hit the hardest, mainly due to persistently low production, prominent overcapacity issues, and rising labor costs [3].

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Data from the European Association of Automotive Suppliers (CLEPA) shows that automotive parts suppliers announced 54,000 layoffs in 2024, and an additional 50,000 layoffs were added to the list in 2025, bringing the total number of layoffs to 104,000 in two years, which is equivalent to approximately 142 jobs disappearing every day [3]. This figure has far exceeded the unemployment level during the worst period of the COVID-19 pandemic in 2020 and 2021 (a total of 53,700 layoffs in two years).

Major layoff actions include:

• Bosch Group
  : Plans to cut 13,000 jobs worldwide by 2030, mainly focusing on automotive parts business in Germany [3]
• ZF Group
  : After lengthy negotiations with labor unions, it officially announced 7,600 layoffs in its electric powertrain technology division. Coupled with the nearly 6,000 jobs cut in the past year, the overall scale of layoffs is still staggering [4]
• Continental AG
  : Continues to cut jobs at its German factories, with net profit in 2024 falling by 20% year-on-year [4]
• Schaeffler
  : Plans to cut 4,700 jobs in Europe
• Valeo, Faurecia
  : Also launched large-scale layoff plans

Facing the dual pressure of shrinking traditional businesses and continuous investment in electrification transformation, multinational parts giants have optimized their business structures through strategic adjustments:

: ZF has clearly abandoned the plan to sell its electric drive and transmission technology division, but will cut approximately 7,600 jobs in this division by 2030, with the goal of saving more than €500 million by 2027 [4]. ZF CEO Matthias Ziese stated that the new CEO will introduce “China Speed” internally to enhance competitiveness.

: Continental AG’s automotive subsidiary has been spun off and listed in Frankfurt under the name Aumovio in September 2025. The spin-off of its rubber division, ContiTech, is also in progress, and independent operation is expected to be achieved in 2026 [5].

: Faurecia confirmed that it has initiated the process of selling some businesses, including related assets of its interior systems division. As one of Faurecia’s six major business divisions, the interior systems division accounts for nearly 20% of revenue, but its operating profit margin is far lower than the group’s average [5].

Behind the layoff crisis facing the European automotive supply chain is the result of the superposition of multiple factors:

1. Persistent Weak Market Demand
   : New car sales in Europe grew weakly in 2025, far lower than industry expectations, leading to shrinking orders and idle production capacity for supply chain enterprises [3]

2. Rapid Rise of Chinese Competitors
   : Chinese automakers, with more price-competitive complete vehicles and a complete and efficient supply chain system, are continuously squeezing the profit margins of European suppliers [3]

3. High Costs of Electrification Transformation
   : While the traditional internal combustion engine business of many parts companies is shrinking rapidly, new businesses related to electric vehicles have not yet achieved economies of scale, leading to profitability difficulties [3]

4. Technology Iteration Risks
   : Although automotive electronics and infotainment system suppliers have the fastest compound annual revenue growth rate, their profit margins are declining, mainly due to heavy R&D investment, rising prices of electrical components, and investment needs for new product launches and promotions [2]

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From the stock price performance from September 2024 to January 2026, the Hong Kong-listed automotive sector shows significant differentiation:

Stock Ticker	Company Name	Opening Price	Closing Price	Growth Rate	Volatility
1211.HK	BYD	$78.33	$99.20	+26.64%	2.73%
0175.HK	Geely Auto	$8.94	$17.13	+91.61%	3.15%
2333.HK	Great Wall Motor	$11.28	$14.05	+24.56%	2.94%
1339.HK	Zotye Auto	$2.97	$6.75	+127.27%	2.67%
1316.HK	Nexteer Automotive	$2.45	$7.31	+198.37%	4.27%

:

• Geely Auto
  has the most outstanding performance, with a growth rate of 91.61%, mainly benefiting from a clear successful path for new energy models, full-year volume of high-margin models such as Zeekr 9X/Galaxy M9 to optimize product structure, and accelerated exports of new energy vehicles [6]
• BYD
  , the “top seller” of new energy vehicles, closed 2025 with sales exceeding 4.6 million units, with full-year pure electric vehicle sales reaching 2.26 million units, surpassing Tesla in annual pure electric vehicle sales for the first time [7]
• Great Wall Motor
  achieved an annual sales volume of 1.324 million units, a new high, thanks to the simultaneous growth of overseas sales and new energy business

:

• Nexteer Automotive
  has the highest growth rate (198.37%) but also the highest volatility (4.27%), reflecting the market’s high expectations and high-risk characteristics of automotive electronics suppliers
• According to CMB International’s analysis, the performance of the parts supplier index is between that of the vehicle manufacturer index and the battery manufacturer index [6]

According to the automotive industry outlook report released by CMB International in December 2025 [6]:

• Core Investment Logic: Clear successful path for new energy models; a more complete new energy product matrix in 2026 will continue high sales growth; high-margin models optimize product structure; accelerated exports of new energy vehicles boost sales and profits; attractive valuation

:

• Affected by the profit margin decline of international parts giants such as Bosch, the market holds a cautious attitude towards the profit prospects of automotive electronics and infotainment system suppliers
• It is expected that parts suppliers will continue to face price pressure from automakers and cost increase challenges in 2026

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The predicament of traditional Tier 1 giants such as Bosch essentially reflects the

:

1. Chinese Suppliers Lead in Profitability
   : Chinese parts suppliers maintain the healthiest EBIT margin in the world (5.7%), far higher than Europe (3.6%) and South Korea (3.4%) [2]
2. Accelerated Vertical Integration Trend
   : Chinese automakers such as BYD adopt a vertical integration strategy, enabling their infotainment market share to increase by 47% year-on-year [8], achieving self-sufficiency in core parts
3. Obvious Cost Structure Advantage
   : Chinese automakers have significant advantages in cost control with a complete supply chain system and efficient production layout

:

• BYD’s overseas sales reached 1.05 million units in 2025, a year-on-year increase of 145%, breaking the 1 million unit mark for the first time [7]
• Chery Group set three new records for monthly exports, annual exports, and cumulative exports
• Great Wall Motor achieved a new high in annual sales thanks to the simultaneous growth of overseas sales and new energy business

:

• The business contraction of multinational parts giants provides market entry opportunities for Chinese suppliers
• Luxshare Precision acquired a 50.1% stake in Leoni for €205.41 million, marking the strategic layout of Chinese suppliers in the European market [5]

:

• Although traditional automotive electronics suppliers face profit margin pressure, the growth potential of emerging fields such as intelligent driving and connected cars remains huge
• Desay SV leads the world in in-vehicle entertainment system sales [8]

:

• The reduction ratio of purchase tax for new energy vehicles will be reduced from 10% to 5% in 2026, with a cap of RMB 15,000
• The “trade-in” subsidy policy is likely to end at the end of 2025

:

• Competition in the Chinese automotive market is becoming increasingly fierce, with the operating profit margin dropping from 8.99% in 2014 to 4.3% in 2024 [1]
• Pressure from automakers and overcapacity of local brands have intensified price competition

:

• Geopolitics is developing highly dynamically, affecting the layout of the automotive industry chain
• The EU may introduce a European manufacturing protection policy requiring a certain proportion of parts in key industries to be produced in Europe [3]

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1. Bosch’s profit margin dropping below 2% is a landmark event in the in-depth integration of the global automotive supply chain
   , not an isolated case. This phenomenon reflects that the entire industry is undergoing structural adjustment, with traditional parts suppliers facing triple pressure of declining demand, rising costs, and electrification transformation.
2. The layoff wave in the European automotive supply chain is unprecedented in scale
   (over 100,000 layoffs in two years), indicating that industry integration has entered a deep-water zone. Giants such as ZF, Continental AG, and Faurecia are responding to the crisis through business spin-offs and layoffs.
3. The valuation of the Hong Kong-listed automotive sector shows significant differentiation
   : vehicle manufacturers have performed relatively steadily, with Geely Auto leading the rise; parts suppliers have greater volatility, but the intelligent track still has growth potential.
4. The trend of discourse power in the supply chain shifting from West to East is clear
   . Chinese suppliers, relying on cost advantages and vertical integration strategies, are reshaping the pattern of the global automotive supply chain.

:

• Vehicle Manufacturers
  : Geely Auto (0175.HK) - Successful new energy transformation, optimized product structure, accelerated exports
• Intelligent Suppliers
  : Desay SV (002920.SZ) - Leader in intelligent cockpits, benefiting from the software-defined vehicle trend
• Battery Manufacturers
  : CATL (300750.SZ), Calb (666.HK) - Profit improvement driven by rising lithium carbonate prices

:

• Traditional automotive electronics suppliers - Facing pressure from high R&D investment and declining profit margins
• Low-margin parts suppliers - Profit margins continue to be eroded by price wars
• Suppliers with a high proportion of European business - Facing dual pressure of weak demand and rising costs

• Global auto sales recovery falls short of expectations
• New energy vehicle subsidy policy is reduced more than expected
• Geopolitical risks affect supply chain stability
• Raw material price fluctuations affect gross profit margin

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[1] Bosch CEO: 2025 Profit Margin to Be Below 2% - EET-China
[2] 2025 Global Automotive Parts Supplier Study - Roland Berger
[3] Over 100,000 Layoffs in Two Years! European Automotive Supply Chain Faces Severe Cuts - Sina Auto
[4] ZF: Layoffs Extend to CEO, New CEO to Introduce “China Speed” Internally - Sohu Auto
[5] Business Restructuring, Widespread Profit Decline: Multinational Parts Giants Face a Tough Transition Period - China Youth Daily
[6] Automotive 2026 Outlook: Intensified Competition Beyond Boundaries - CMB International
[7] BYD’s Pure Electric Sales Surpass Tesla, 4 Automakers Exceed 3 Million Annual Sales - Sina Finance
[8] 2025 Global Top 100 Automotive Parts Suppliers List Released, CATL Enters Top 5 - Automotive Business Review