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World may have hit peak car output, says Bosch as lower India demand hits earnings
Photo Credit: Reuters

Global automotive production may have peaked, auto supplier Robert Bosch said on Wednesday, announcing job cuts and a review of its business to cope with a 44% drop in full-year operating profit and a downturn in demand for cars.

Global automotive production is expected to fall for the third consecutive year, by 2.6% to 89 million vehicles in 2020, following a drop in demand in China, Europe and the United States, the Stuttgart-based car parts supplier said.

"It could well be that we have passed the peak of automotive production," Bosch CEO Volkmar Denner said.

He also said he assumed the low level would remain constant and did not expected an increase in global automotive production before 2025, while the market would shrink by 10 million units in 2020 compared with 2017.

Bosch said its full-year earnings before interest and taxes (EBIT) fell to 3 billion euros ($3.33 billion) in 2019, a 44% drop from 5.4 billion euros in the year-earlier period and its EBIT margin contracted to 4% from 7% because of lower demand in China and India.

Total revenue was stable last year, at 77.9 billion euros, as Bosch benefited from increased complexity in vehicles, which allowed it to sell more components and systems per vehicle produced.

A shift to electric cars is expected to create opportunities longer term, but will impact jobs in the near term, Denner said.

Ten workers are needed to make a diesel injection system, three for a gasoline system, and one to produce an electric motor, he said.

As a result, Bosch has said staff adjustments will be made where necessary, including shorter working hours, voluntary redundancy and severance packages, although Bosch declined to provide a global figure for headcount reductions.

Already last year, Bosch reduced its headcount by 6,800 to 402,800, with 2,000 jobs cut in Germany and 3,600 positions reduced in Asia Pacific.

Bosch hopes to exceed 1 billion euros in sales from electric car components this year, and has set aside 500 million euros for investments in electromobility for 2020, Denner said.

Bosch will also start production of long-range LIDAR, a new sensor category, and begin production of hydrogen fuel cells in 2022.

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