Summary
Bosch signaled sustained pressure on profitability through 2026, delaying its target of a 7% operating margin to 2027 at the earliest. Management cited worldwide tariff increases, intensifying price competition, and lingering chip shortages—especially low-cost Nexperia components—as the key headwinds.
2025 Preliminary Results
- Sales: €91 billion (up 0.8%; about $108 billion).
- Operating margin: 1.9%, down from 3.5% a year earlier.
- Profitability compressed as cost inflation and pricing pressure outpaced revenue growth.
Main Drivers of Pressure
- Tariffs: Higher duties “worldwide” expected to have their full impact in 2026, raising import and component costs across global supply chains.
- Price competition: Ongoing market pressure is limiting pricing power in a slow-growth environment.
- Chip shortages: Continued disruption tied to Nexperia’s low-cost chips—cheap but critical parts that can halt production. Replacement sourcing is costly and complex; Bosch hopes for more definitive solutions within six months, but legal uncertainty persists.
Operational Response
- Workforce restructuring: ~13,000 job cuts (~3% of global staff) announced last year to protect margins and competitiveness.
- Focus on cost discipline, efficiency gains, and supply resilience amid elevated trade frictions.
Industry Implications
- As the world’s largest auto supplier, Bosch’s outlook suggests broader sector pressures on margins in 2026, even if volumes hold.
- Tariff dynamics may raise costs on raw materials, subassemblies, and finished parts, with limited near-term ability to fully pass through to customers.
- Semiconductor reliability remains a key risk: shortages of even sub-cent chips can disrupt vehicle assembly.
Outlook and What to Watch
- Margin goal: 7% target pushed to 2027+.
- Monitoring items: final 2025 results and any 2026 guidance; the outcome of the Nexperia court dispute; tariff and trade policy trajectories into 2026; and progress on qualifying alternate chip sources.
Exchange rate noted: $1 = €0.8404.
