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The challenges in 2024 remain unchanged, Bosch China is not afraid of layoffs but is forced to fight price wars

In a difficult environment, Bosch Group still achieved double growth in sales and profits in fiscal 2023.

Data shows that in fiscal year 2023, despite the unfavorable economic situation and market environment, Bosch still achieved sales of 91.6 billion euros, an increase of 3.8%, and 8% after adjusting for exchange rate effects. Earnings before interest and taxes (EBIT) were 4.8 billion euros (3.8 billion euros in fiscal year 2022), and the EBIT margin was 5.3%, an increase of 1% year-on-year.

But even if that was higher than expected, it would still be below Bosch's long-term profit margin target of at least 7 percent by 2026.

On April 18, Stefan Hartung, Chairman of the Board of Management of Bosch Group, said at the financial report communication meeting: "In fiscal 2023, Bosch achieved its business goals and further consolidated its market position in multiple business areas such as semiconductors and building intelligent systems. Despite the unfavorable economic situation, Bosch continues to invest in innovation, cooperation and mergers and acquisitions to ensure growth during the transformation period."

Stefan Hartung, Chairman of the Board of Management of Robert Bosch GmbH

Given the current economic environment, Bosch believes that the business outlook for 2024 will continue to be sluggish. "The sprint at the end of 2023 allowed us to achieve our full-year targets," said Markus Forschner, member of the Bosch Group's board of directors and chief financial officer. "However, the challenges in fiscal 2024 remain the same and will be no less difficult than in 2023."

"There are still unclear signs of economic recovery in 2024." Forschner analyzed: In 2024, the global economic growth rate will be only 2.3%, automobile production will stagnate, the mechanical engineering market will continue to be weak, and the consumer goods market may recover slightly after two years of consumption suppression.

In the first quarter of fiscal year 2024, Bosch Group's sales fell by 0.8% year-on-year, but after adjusting for exchange rate effects, it achieved a 2.7% increase. "This shows that our sales growth target for this year - 5% to 7% - is very challenging."

These challenges have put pressure on Bosch to lay off employees, and layoffs have become one of the most concerned issues in overseas media.

However, in the Chinese market, where sales account for 20% of global business, there is no pressure to lay off employees this year. "We have many new areas of development in China, including artificial intelligence, digitalization, and autonomous driving. We will also increase the number of employees, and there is no such worry (of layoffs) in China now," said Xu Daquan, president of Bosch China.

Xu Daquan, President of Bosch China

According to its explanation, in fiscal year 2023, Bosch's sales in the Chinese market reached 139 billion yuan (about 18.2 billion euros), a year-on-year increase of 5.2%. Among them, the smart travel business has become the main growth engine of Bosch's business in China, and its sales in China have increased by 8.2% to 112.1 billion yuan (about 14.6 billion euros).

However, when talking about the current fierce price war in China's auto market, Xu Daquan's expression was quite helpless.

"Last year, the average car price in China dropped by 15%. A new price war started in February this year, and the cost of some models dropped by about 20% to 30%. "Xu Daquan said that domestic car companies are not making money in the production of electric vehicles, which he personally thinks is unhealthy. There must be many reasons behind the unhealthy situation, because too many car manufacturers are manufacturing new energy vehicles and electric vehicles. Moreover, the price reduction of new energy electric vehicles has also dragged down the (price) of traditional internal combustion engines, so Bosch will definitely be affected in the industry. "Many customers have asked us to reduce prices. We are negotiating step by step. Some even said, 'If you don't agree, we won't pay.' We are coordinating with each other. I estimate that the price will be discussed from the beginning of the year to the end of the year. It will take a long time. We are prepared for this. We are also working hard on reducing prices for our suppliers, improving our production efficiency and reducing costs. We hope that through these efforts, we can give the OEMs more room for price reduction, so that they can also win in the 'battle'. But in the long run, this situation should not last too long. If no one makes money, how can we move forward? This is a very painful thing."

Xu Daquan said that only by achieving a reasonable profit margin can we continue to invest in new technologies, and without profits it cannot be sustained.

Over the past decade, Bosch has invested more than 50 billion yuan in China. By the end of 2023, Bosch has 34 production bases and 26 technology centers in China, with nearly 58,000 employees. China is Bosch's market with the largest number of employees outside of Germany, with more than 10,000 R&D personnel. In 2023 alone, Bosch's R&D expenses in China reached 11 billion yuan (about 1.4 billion euros).

It is reported that Bosch hopes to further cut costs and advance structural restructuring to remain competitive during the transformation period and avoid forced layoffs.

Hartung believes that even if the growth rate of markets such as electric mobility is lower than expected, climate action will still create many opportunities.

In the long term, as a leading global supplier of technology and services, Bosch plans to achieve an average annual growth of 6% to 8%, a profit margin of at least 7%, and to become one of the top three leading suppliers in key markets in all regions of the world.


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