On April 18, Bosch Group announced its financial data for 2023 at its annual press conference.
Despite the adverse economic situation, Bosch has responded well to the challenge, achieving growth in sales and profits and successfully achieving business goals.
It is worth noting that Bosch did not elaborate too much on the better-than-expected results in 2023 at the earnings conference, but focused more on the challenges of 2024 and future and how to maintain steady performance growth.
Source: Bosch, according to Bosch’s forecast, the global economic growth in 2024 will be lower than that of the previous year, only 2.
3%, the growth of automobile production will be stagnant, the mechanical engineering market will remain weak, and the business outlook will remain depressed.
How can Bosch achieve sound business development? While increasing innovation, cooperation and mergers and acquisitions, Bosch believes that cost-cutting is still a priority.
Behind the reverse growth in 2023: the two major growth areas of the automotive business and the Chinese market, Bosch Group’s sales increased by 3.
8% to 91.
6 billion euros in 2023.
After adjusting the impact of the exchange rate, it reached 8%, which is within the target range of 6% to 9% set last year.
Among them, the car and smart travel business remains the highest business segment by sales, with nominal sales growth of 6.
9 per cent (10.
9 per cent after currency adjustment) to 56.
2 billion euros, accounting for more than 60 per cent of the group’s sales.
Photo: Bosch Group, in addition to the increase in sales, Bosch’s profitability and financial strength have also been improved.
EBIT rose from 3.
8 billion euros in 2022 to about 4.
8 billion euros, and EBIT margins rose from 4.
3 per cent to 5.
3 per cent.
In the automotive and smart travel sector, although it has promoted a lot of forward-looking investment and is in the process of transformation, its profit margin before interest and tax has increased to 4.
4% from 3.
4% the previous year.
As a result, Bosch has found huge growth opportunities in the automotive business.
The first is the field of electric travel, where Bosch will launch about 30 production projects related to electric vehicle technology this year alone.
“Electric travel is coming, and the only suspense is how quickly it will spread to all parts of the world.
” Said Dr.
Stefan Harton, chairman of the board of Bosch Group.
Bosch estimates that as much as 70% of new car sales in Europe could be pure electric by 2030.
In China and North America, the proportion is expected to be between 40% and 50%.
In addition, for the Chinese and North American markets, Bosch expects high-performance hybrid vehicles to occupy a significant market share by 2030-1/5 in North America and 1/3 in China.
At the same time, Dr.
Harton also mentioned that for long-distance heavy commercial vehicles, there is still a demand for solutions such as plug-in hybrid and extended range.
Motor and internal combustion engine will continue to coexist for some time in the future, which also creates opportunities for Bosch.
Bosch’s forecast of the electrification ratio of various regions in 2030.
picture source: Bosch.
In addition, the development of vehicle motion control technology will further drive the growth of Bosch’s intelligent travel business.
Bosch will achieve faster-than-market annual growth in the new redundant braking system tailored for electric travel and self-driving, reaching 10 per cent.
Dr Harton said: “Bosch remains a leader in this field.
This year, the first order will go into mass production.
” Overall, Bosch is expected to achieve sales of hundreds of millions of euros through this technology by 2030.
Hydrogen energy is another growing area of Bosch’s smart travel business.
However, the development of hydrogen energy varies from market to market and is full of changes.
Bosch believes that China is expected to be the first to become a leading market for hydrogen energy, while European or North American markets are expected to show significant growth in the next decade.
Bosch also reiterated its business plans in the growth area of hydrogen energy.
Bosch began producing hydrogen power modules in Stuttgart, Germany, and Chongqing, China, in 2023, and sales of Bosch hydrogen technology are expected to reach 5 billion euros by 2030.
From a technical point of view, carrying a hydrogen internal combustion engine in a commercial vehicle will be one of the fastest ways to achieve climate neutralization.
Bosch is also promoting the development of hydrogen internal combustion engines. Dr. Harton revealed that the hydrogen internal combustion engine equipped with Bosch injection technology will be put into use in India as early as this year.
At the same time, Bosch has received five production orders from well-known truck manufacturers in the world’s three major economic zones.
According to Bosch, by 2030, the market size of hydrogen internal combustion engine technology will reach nearly 1 billion euros.
However, the development of hydrogen energy is inseparable from the necessary infrastructure and adequate hydrogen production, and the market is growing rapidly.
Bosch predicts that by 2030, the global installed capacity of hydrogen reduction cells will reach about 170 gigawatts, which is about 25 times the current level.
Before that, production capacity almost doubled every year.
By the end of 2023, the global electrolysis market is expected to reach 37 billion euros.
Bosch also dabbles in this market.
In April, Bosch was working on the first prototype, which can produce 23 kilograms of hydrogen per hour and output 1.
2 megawatts, according to Dr.
Harton.
At present, these prototypes have been shipped to the first batch of engineering customers and are about to usher in mass production.
By next year, Bosch’s electrolytic stack will be on the market.
“in the future, Bosch will not only be synonymous with hydrogen powertrain, but also synonymous with hydrogen energy production,” Dr.
Harton said.
” As the world’s largest market for electric vehicles and the most potential hydrogen market, the importance of China to Bosch’s automotive and smart travel business is self-evident.
According to Dr.
Xu Daquan, president of Bosch China, despite market changes, industrial changes and increased competition, Bosch’s business in the Chinese market continued to grow in 2023, reaching 139 billion yuan (about 18.
2 billion euros).
An increase of 5.
2% year-on-year, accounting for about 20% of the group’s sales.
Among them, automobile-related business became the main engine of growth, with sales in China growing by 8.
2 per cent to 112.
1 billion yuan (about 14.
6 billion euros), accounting for more than 80 per cent of the group’s sales in China. Dr. Xu Daquan, president of Bosch China.
photo source: Bosch Group, Dr.
Xu Daquan said: “China is not only a huge consumer market, but also an important innovation base.
” The steady performance growth provides a solid foundation for Bosch to continue to deepen local innovation and layout in China.
” Given the importance of the Chinese market, Bosch has invested more than 50 billion yuan in China over the past decade, and Bosch spent 11 billion yuan (1.
4 billion euros) on research and development in China in 2023 alone.
In the future, Bosch China willContinue to focus on new energy, smart driving, hydrogen energy, software, artificial intelligence and other growth areas, adhere to technological innovation, sustainable development and open cooperation with local enterprises, and strive to use technological research and development in the Chinese market to feed the world and achieve more “local for global”.
The cost reduction “broadsword” is high, and the challenge in 2024 will not be reduced.
“the challenge in 2024 will not be less than 2023.
” This is the consensus of the senior management of Bosch Group.
First of all, it can be seen from the intensification of the price war in the car market.
Since Tesla took the lead in setting off a price war at the beginning of last year, the heat of the price war has never subsided.
“Last year, the average car price in China fell by about 15%.
In February this year, a new price war began again, with some models cutting costs by about 20% to 30%. ” Dr. Xu Daquan said.
After a year of waiting and watching, the answer seems to have become clear.
As Dr.
Xu Daquan said bluntly, “the price war will never end.
” The reason is the excess capacity of cars. Dr. Xu analyzed: “of China’s 30 million car production last year, 26 million were cars and 4 million were commercial vehicles.
” 26 million cars, which companies are the most suitable? If it is 10, an average of 2.
6 million, such a number of enterprises may be able to live a more prosperous life.
But now let’s count that there were at least nearly 60 in terms of scale last year, so everyone has to compete.
In this state, everyone has to fight.
The chairman of the mainframe factory believes that it is reasonable to dump 70% to 80% in the next two or three years.
I personally think that in China, the closure of so many mainframe factories is also very difficult to accept, it is also difficult for local governments to accept, and it is difficult for the mainframe factory itself to accept.
Therefore, the process may be a little longer.
Before the competition reaches stabilization, the pressure of price reduction will always be there, and everyone will keep rolling.
” The mainframe factory is forced by the market, the supplier will be forced by the mainframe factory.
In such a not-so-benign state of the car market, Bosch as a core supplier is naturally involved, and profits are affected. Dr. Xu revealed that many customers have asked Bosch to reduce the price, and some customers may even say, “if you don’t cut the price, you won’t pay”.
Under the pressure of reducing the cost, Bosch can only keep negotiating.
Xu Daquan expects that the price negotiations will continue from the beginning of the year to the end of the year, and Bosch is ready to do so.
However, in terms of price reduction, Bosch has its own bottom line.
Bosch is willing to give the mainframe factory more room to reduce prices through the price reduction of its own suppliers, the improvement of production efficiency and the reduction of costs, but it will not use losses in exchange for market share.
“from Bosch’s point of view, if customers demand too much price reduction, or if someone can supply at a lower price, we may have to lose some of our quantity.
We should balance market share with sales revenue and profits, which should be coordinated to a certain extent.
Because we want to maintain a virtuous circle, continue to invest in new technology areas, keep going, this is our idea. ” Dr. Xu said.
In addition to the pressure on reducing costs, the current market environment is also very depressed.
According to Bosch’s forecast, the global economic growth in 2024 will be lower than that of the previous year, only 2.
3%, the growth of automobile production will be stagnant, the mechanical engineering market will remain weak, and the business outlook will remain depressed, as can be seen from the slight decline in Bosch’s sales in the first quarter of this year compared with the same period last year.
In addition, Bosch also has to face the challenges of investing in strategic areas.
In fiscal year 2023, Bosch’s forward-looking investment exceeded 12 billion euros, of which capital expenditure reached a new high of 5.
5 billion euros and R & D expenditure reached 7.
3 billion euros, accounting for 8 per cent of sales.
This year, Dr.
Xu estimates that Bosch will still spend 8% to 9% on research and development to ensure future growth.
Over the next two years, Bosch also plans to invest 4 billion euros to enhance the competitiveness of machinery, equipment and research and development.
Second, by 2027, Bosch will invest about 700 million euros in smart travel business staff training and professional skills upgrading.
The problem is that the positive impact of these forward-looking investments on sales and profitability may take several years to become apparent, and there is also a lot of uncertainty about whether and when many new technologies can and will actually be realized.
At the same time, the structural restructuring and process optimization implemented by Bosch in order to reduce costs will also have a negative impact in the initial stage, while the positive impact will not become apparent until a period of time.
All in all, Bosch’s challenge is to strike a balance between improving profitability and financial strength, and making forward-looking investments to ensure future growth.
However, Bosch made it clear that it would not quickly achieve its profit margin target by cutting investment in future-oriented areas.
Bosch still hopes to achieve its growth target through self-financing as much as possible and maintain high profitability and financial strength.
To increase innovation, cooperation and mergers and acquisitions to achieve further growth, despite the adverse economic situation, Bosch expects to maintain sound business development, and has set a business goal of “accelerating growth”: first, to achieve an average annual growth rate of 6% to 8%.
And achieve a profit margin of at least 7%.
second, among the three leading suppliers in key markets in all regions of the world.
Bosch plans to achieve the above goals in the next few years by actively opening up new and related business areas and taking multi-pronged measures around innovation, cooperation and mergers and acquisitions to continue to implement the growth strategy.
For example, around the transformation of the automotive industry, at the beginning of this year, Bosch carried out the largest restructuring in the history of the group, establishing Bosch’s intelligent travel business and promoting cross-departmental coordination of strategic technology.
especially software, semiconductors and in-car computer technology.
Although Bosch has a wide range of business layout, it is more important to focus on the core business.
In the future, whether electrified or automated, software or artificial intelligence, sustainable or diversified, Bosch will focus on growth.
In addition, Bosch is “taking a two-pronged approach” to promote mergers and acquisitions and cooperation to expand key business areas, such as semiconductors.
Bosch acquired a fab in Roseville, California, USA, and established an European semiconductor manufacturing company in Dresden, Germany, with several partners.
In terms of smart driving, Bosch has gradually developed from high-end products to middle-end products through cooperation with more local companies, such as intelligent cockpit and auto joint world cooperation, high-end self-driving and Wenyuan knowledge-action cooperation.
Through these measures, Bosch can flexibly promote the development of strategic business.
Although electrification, autopilot and hydrogen fuel are currently unprofitable from a global perspective, but as long as it thinks it is the right track, Bosch will unswervingly follow it.
“But we need to balance how much we invest and assess whether we can afford it and whether we can stop in time if we can’t afford it.
This is a process of constant balance and constant thinking.” Dr. Xu said.
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