Recently, many multinational automotive parts giants have followed the pace of automakers and disclosed their performance in the first half of 2024.
　　According to incomplete statistics from Daily Economic News reporters, as of now, multinational automotive parts suppliers such as ZF, Continental Group, Forvia, Valeo, BorgWarner, Magna, and Aptiv have all released their financial reports for the first half of this year. From the data, few companies have achieved dual growth in revenue and profit. Among them, ZF leads with revenue of 22 billion euros, but its revenue and profit have both declined; BorgWarner is the only parts company that has achieved growth in both revenue and net profit.

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　　It is worth noting that many parts companies' financial reports mention the negative impact of slowing sales growth of electric products. For example, Valeo, a French electric drive system manufacturer, stated that due to the significantly lower-than-expected sales of electric vehicles from its major European customers, the sales of its high-voltage electric drive business in the first half of 2024 plummeted by 40% year-on-year, thus dragging down its overall performance.
　　Based on the performance in the first half of the year, many automotive parts companies have lowered their financial expectations. Among them, ZF cautiously adjusted its 2024 sales forecast to 42.5 billion to 43.5 billion euros (previously predicted to exceed 45 billion euros); Continental Group currently expects group sales of 40 billion to 42.5 billion euros for fiscal year 2024 (previously predicted to be approximately 41 billion to 44 billion euros).
　　 Some companies experience a decline in both revenue and profit
　　A detailed reading of the first-half financial reports of various automotive parts manufacturers reveals that many companies have experienced a decline in performance, with few achieving dual growth in revenue and net profit, and some even experiencing a decline in both revenue and net profit.
Taking ZF, which achieved sales of 22 billion euros in the first half of the year, as an example, its revenue decreased by 5.6% year-on-year. ZF attributed this to market challenges and the impact of mergers and acquisitions.
　　During the same period, ZF's adjusted EBITDA totaled 780 million euros, down 17.1% year-on-year (941 million euros); the adjusted EBITDA margin was 3.5%. ZF stated that this was mainly affected by continued substantial R&D investment of 1.8 billion euros, the automotive market situation, and fixed costs for new factories and new product launches.
　　"Despite the large investment and pressure on profitability, our free cash flow has improved compared to last year." said Michael Frick, CFO of ZF Group. "Given the persistently challenging market conditions, our profit and cash flow are in line with our expectations. At the same time, we are enhancing our competitiveness, adhering to the strategic guideline of 'strengthening our strengths', and the company will continue to promote structural adjustments: further increasing investment in commercial vehicle technology, industrial technology, chassis solutions, and after-sales services, which have a certain level of profit and are forward-looking areas."
　　Similar to ZF, Continental Group also experienced a decline in both revenue and net profit in the first half of the year. In the second quarter of 2024, Continental Group's sales were 10 billion euros, down 4.1% year-on-year; adjusted EBITDA increased to 704 million euros, up 40.6% year-on-year; net profit was 305 million euros, up 46.2% year-on-year.
　　Based on the financial data for the first quarter of this year, in the first half of this year, Continental Group's sales were 19.8 billion euros, down 4.3% year-on-year; adjusted EBITDA was 900 million euros, down 16.3% year-on-year; net profit was 252 million euros, down 57.4% year-on-year.
　　In its financial report, Continental Group stated that the weak European automotive market production has impacted its performance. Data shows that in the second quarter of 2024, global passenger car and light commercial vehicle production was basically flat year-on-year at 22.1 million units, a slight decrease of 1% year-on-year. During the same period, European automotive production was approximately 4.3 million units, a significant decrease of 6% year-on-year.
　　"The strong measures we have taken to reduce costs have begun to take effect, and our performance has improved significantly compared to the first quarter. We will continue to work hard in the second half of the year and will not slacken our efforts to achieve our expected financial goals." said Olaf Schick, CFO of Continental Group.
　　Forvia also faced pressure on its performance. The financial report shows that in the first half of this year, Forvia's sales were approximately 13.5 billion euros, down 0.6% year-on-year; operating profit was approximately 700 million euros, up 3.8% year-on-year; net profit was approximately 4.8 million euros, down 83% year-on-year.
　　From a global regional perspective, Forvia achieved business growth in Europe, North America, and Asia (excluding China), with growth rates of 2.0%, 5.1%, and 7.2%, respectively. However, in the Chinese market, Forvia's sales decreased by 6.1% year-on-year. The reasons include a significant decline in sales to BYD and Tesla by Forvia's seating division, and a significant shrinkage of exhaust business due to the rapid electrification of the Chinese market.
　　 Electrification-related businesses did not meet expectations
　　Unlike the above-mentioned companies, some multinational parts manufacturers have also encountered the dilemma of "increased revenue but not increased profit" or "increased profit but not increased revenue".
　　For example, in the first half of this year, Valeo Group achieved sales of 11.1 billion euros, down 1% year-on-year; operating profit was approximately 445 million euros, up 23% year-on-year; net profit attributable to shareholders was 141 million euros, up 18% year-on-year; free cash flow was 121 million euros, an increase of 277 million euros compared to the first half of 2023.
　　Valeo stated that the main reason for the decline in revenue is the decrease in sales of high-voltage electric drive business. It is reported that during the period, sales of high-voltage electric drive business decreased by 330 million euros, a year-on-year decrease of 40%, and the main influencing factor is that the sales of electric vehicles from major European customers are far lower than expected.
　　According to the latest data released by the research institution EU-EVS, in the first half of 2024, the cumulative sales of pure electric vehicles in 15 European countries were approximately 790,100 units, a year-on-year decrease of 13.5%.
　　Magna also experienced increased revenue but not increased profit. The financial report shows that in the first half of this year, Magna achieved revenue of $21.928 billion, up 1.3% year-on-year; net profit was approximately $322 million, down 41.2% compared to the same period last year ($548 million).
　　It is worth noting that Magna also mentioned in its financial report the impact of the failure of electric vehicle sales growth to meet previous expectations, and therefore adjusted its financial outlook for 2026. Magna stated that in recent months, many automakers have delayed, reduced, or otherwise changed their electric vehicle production plans, while increasing the production of hybrid or internal combustion engine vehicles.
　　"Our updated 2026 outlook reflects updates to customer programs and a more cautious view of mid-term electric vehicle penetration rates (especially in North America). While we have lowered our sales forecast, we are taking a number of concrete actions to mitigate the sales impact and continue to expect margin expansion and strong free cash flow growth." said Swamy Kotagiri, CEO of Magna.
　　Aptiv, focusing on future mobile travel solutions, achieved significant profit growth in the first half of the year. The financial report shows that in the first half of this year, Aptiv's revenue was US\$10 billion, a year-on-year decrease of 1%; net profit was US\$1.56 billion, more than three times that of the same period last year (US\$375 million); adjusted operating income was US\$1.15 billion.
　　From a regional perspective, in the first half of this year, Aptiv's performance in the North American and European markets declined, with revenue falling by 3% and 2% respectively; however, the Asian market performed steadily, with revenue remaining flat, and the Chinese market growing by 1%.
In contrast, among the manufacturers surveyed by reporters, BorgWarner is the only automotive parts supplier that has achieved positive growth in both revenue and net profit. The financial report shows that in the first half of this year, BorgWarner Group's sales were approximately US\$7.2 billion, a year-on-year increase of 2%; operating profit was approximately US\$610 million, a year-on-year increase of 2.5%; and net profit was approximately US\$540 million, a year-on-year increase of 19%.
　　Specifically, in the first half of this year, BorgWarner's internal combustion engine business revenue reached US\$6.4 billion, a year-on-year increase of 4.6%, with adjusted operating profit of nearly US\$1 billion, a year-on-year increase of 12.2%; however, its electric drive-related business sales fell by 14.5% year-on-year to US\$900 million, with adjusted operating profit of -US\$111 million, an increase in losses compared to the same period last year.
　　Multiple Companies Lower Performance Targets
　　Based on the first-half performance of this year, many parts companies have chosen to lower their full-year financial expectations. ZF, for example, stated that, considering the market situation, it cautiously adjusted its 2024 sales expectations to between €42.5 billion and €43.5 billion.
　　At the same time, based on the advantages of the company's flexible production layout and the effects of the implemented performance measures, the adjusted EBIT margin remains at the previous expectation, i.e., between 4.9% and 5.4%, and the expectation of €800 million in free cash flow also remains unchanged.
　　Continental AG adjusted its sales forecast for this year to between €40 billion and €42.5 billion, with the adjusted EBIT margin still expected to remain between 6% and 7%, and adjusted free cash flow expected to be between €600 million and €1 billion, compared to the previous forecast of €700 million to €1.1 billion.
　　Due to a significant decrease in new orders, Valeo also lowered its original target of €22.5 billion to €23.5 billion in revenue for 2024 to €22 billion, and lowered its original target of €24.5 billion to €25.5 billion in revenue for 2025 to €23.5 billion to €24.5 billion.
　　It is understood that due to the sluggish performance of the high-voltage electrification business and the negative impact of the postponement of some large orders, Valeo's new order amount in the first half of 2024 was only €9.1 billion, a year-on-year decrease of over 50%.
　　For Magna, the outlook for total sales in 2024 remains largely unchanged, with the adjusted EBIT margin range narrowing to 5.4% to 5.8%. However, Magna currently expects its 2026 sales to be between US\$44 billion and US\$46.5 billion, a decrease of approximately 10% compared to the US\$48.8 billion to US\$51.2 billion expected in February this year; the EBIT margin is expected to be 6.7% to 7.4%, compared to the previous expectation of 7% to 7.7%.
　　Considering the downward adjustment of vehicle production expectations, weak foreign exchange rates, and the slowdown in sales growth of electric products, based on the first-half performance, BorgWarner also adjusted its full-year performance expectations, lowering its full-year sales expectations from the previous US\$14.4 billion to US\$14.9 billion to US\$14.1 billion to US\$14.4 billion; the full-year operating profit margin is expected to be 8.2% to 8.3%.
　　In fact, the adjustments made by parts suppliers are not limited to the latest outlook on financial reports. At the end of July this year, ZF announced plans to cut 11,000 to 14,000 jobs in Germany by the end of 2028. In its financial report, ZF pointed out that the group's announcement to more effectively reorganize and merge its branches in Germany is also part of the structural adjustment.
　　Continental AG announced in early August this year that it has decided to conduct a further detailed assessment of the spin-off of its automotive subsidiary. After a detailed assessment, the Executive Board will make a decision on the spin-off in the fourth quarter of 2024. Subject to approval by the Executive Board and Supervisory Board, the spin-off and listing of the automotive subsidiary will be put to a vote at Continental AG's Annual General Meeting on April 25, 2025. If approved, the spin-off is expected to be completed by the end of 2025. Preparations for the spin-off are already underway. The aim of establishing two independent companies is to fully leverage Continental's potential for value creation and business growth.
　　Official data shows that Continental's automotive subsidiary achieved sales of approximately €20.3 billion in the past fiscal year and currently employs approximately 100,000 people.
　　“The market and customers have changed dramatically in recent months, particularly in the automotive industry. Looking ahead, the sharp fluctuations in regional markets and the software-driven technological transformation require greater flexibility and autonomy from companies. Against this backdrop, we plan to split Continental into two independent companies,” said Dr. Stoecker, CEO of Continental.

Source: Daily Economic News