Lessons learned from the job cuts at Bosch

The recent announcement of massive layoffs at Bosch, a key supplier in the automotive supply chain, is a sobering indication of the upheavals that are transforming the automotive industry worldwide. The job cuts at Bosch have far-reaching consequences for the industry, especially for German automakers, who are grappling with a shrinking presence in China—a market that has become the epicenter of the automotive industry’s transformation. What lessons can be learned from Bosch’s strategic withdrawal, and what does this mean for German automakers trying to maintain their relevance in the face of fierce global competition?

A signal for the transformation of industry

Bosch’s decision to reduce the workforce points to far-reaching structural changes within the automotive supply chain. As a major supplier to virtually all major German automakers, Bosch’s challenges reflect the broader disruptions affecting traditional OEMs. Historically known for its expertise in internal combustion engine (ICE) components, Bosch is facing the challenge of competing in an industry that is increasingly turning to electrification and software-driven mobility solutions. These job cuts could be a response to shrinking profitability in key areas such as ICE technology, whose demand is falling rapidly.

Impact on German car manufacturers

The consequences of the job cuts at Bosch go beyond the company itself and directly affect the German automakers, who depend on Bosch for a significant part of their components. The Chinese automotive market is becoming increasingly competitive, with players such as BYD and NIO focusing on vertical integration and cost-efficient production. German OEMs are thus in a difficult position. Their reliance on traditional suppliers, which are themselves undergoing painful transformations, reveals weaknesses in their ability to innovate quickly.

For example, Volkswagen and BMW, which have close partnerships with Bosch, could face disruptions in their electric vehicle supply chains, especially if Bosch’s job cuts affect its capacity to supply EV components on a large scale. While BYD and other Chinese manufacturers are increasingly dominating their home market, German brands are not only dealing with shrinking market share, but also with supply chain issues that could hinder their efforts to produce competitive electric vehicles.

Electrification as a global challenge

While there is a strong focus on China, developments in electrification are also leading to significant changes in other important markets. In North America and Europe, markets are shaped by regulatory changes, new technologies and changing consumer preferences. The U.S., for example, has increased incentives for electric vehicle production through the Inflation Reduction Act to promote local battery manufacturing and create a more resilient supply chain. In Europe, the focus is on expanding infrastructure to support the growth of electric mobility, with the development of a comprehensive charging network playing a central role.

For German car manufacturers, this global change offers both opportunities and challenges. New markets for electrification offer opportunities for growth, while at the same time there is a need to adapt quickly to the changing technological landscape in order to remain relevant.

Cost and adaptation pressures

China’s ongoing price war in the EV sector, often referred to as the “Darwinian duel,” is squeezing profit margins across the industry. Thanks to government subsidies, low labor costs, and vertical integration, Chinese manufacturers have been able to significantly undercut their foreign competitors. This aggressive pricing policy is making it increasingly difficult for German automakers to maintain their traditional business models in China.

Bosch, like other German suppliers, is under immense pressure to reduce costs while investing in new technologies. This balancing act is particularly difficult when competing against Chinese companies that benefit from both economies of scale and local market knowledge. For German automakers, this means strategically rethinking their partnerships with suppliers such as Bosch and, if necessary, relying more heavily on localized supply chain solutions in order to remain competitive in China.

Realignment of supply chain partnerships

One of the most important lessons to be learned from the job cuts at Bosch is the urgent need to rethink the approaches of German automakers to partnerships and supply chains. As the Chinese market becomes more competitive, reliance on traditional supply chain structures may no longer be enough. Instead, OEMs need to diversify their supplier base and rely more heavily on localized Chinese suppliers who can produce more efficiently and cost-effectively.

In addition, partnerships with technology-driven companies in China could offer an alternative path to innovation. By collaborating with Chinese technology startups specializing in battery management systems, autonomous driving, and smart cockpits, German automakers could mitigate the impact of supply chain disruptions while accelerating the adoption of new technologies. This approach would also signal a shift away from exclusive reliance on traditional suppliers and promote greater resilience in an unpredictable market.

The future of innovation under cost pressure

One of the most critical questions arising from Bosch’s withdrawal is whether such cost-cutting measures could stifle innovation. For German automakers, the implications are profound—continued innovation is not only desirable, but necessary to remain relevant in an environment where Chinese competitors are rapidly iterating and deploying new technologies. For Bosch, reallocating resources towards EV and software solutions could help in the long run, but reducing the workforce immediately could limit its ability to keep up with the pace of competitors like BYD and Tesla.

German automakers need to focus on how to sustain innovation while keeping costs in mind. This could mean rethinking the traditional R&D model, leveraging open innovation ecosystems, or even establishing joint research projects with Chinese partners. Given the speed at which the market is evolving, it will be crucial to foster a culture of lean but impactful innovation in order to compete with the aggressive tactics of Chinese manufacturers.

Navigating a Changing Landscape

The job cuts at Bosch offer a microcosm of the broader challenges facing the German automotive industry today. The shift towards electrification, software-driven mobility and increasing competition from China are putting massive pressure on traditional players. For German automakers, the key finding is clear: old supply chain models and existing partnerships need a fundamental review. The global electrification push further increases the urgency. New partnerships, especially with technology-driven companies in China, and finding ways to drive innovation despite cost pressures will be critical to navigating this new era.

Adaptation is essential for survival

Despite all the challenges, the current crisis offers the opportunity to make far-reaching changes that the German automotive industry has long postponed. Old structures must adapt not only to the competitive forces in China, but also to the changing regulatory framework and technological innovations worldwide. As Bosch and other suppliers adjust to the realities of an electric and digital future, German automakers must seize the moment to rethink their strategies—or risk losing their relevance in the world’s largest and most dynamic automotive markets.