Schaeffler Predicts No Recuperation for Car Market in 2025, EV Unit Faces Overwhelming Losses

German car and mechanical provider Schaeffler has joined the growing list of auto parts producers warning of a challenging 2025, as it anticipates no rebound in the global car market. The company’s latest outlook highlights the ongoing struggles in the European EV segment, rising competition from Chinese automakers, and the impact of U.S. tariffs on Mexico and Canada.

Schaeffler’s e-mobility division, which recently acquired electric powertrain specialist Vitesco, is expected to face steep operating losses next year, reflecting the intense pressure on European EV suppliers.

Schaeffler’s 2025 Forecast: Key Highlights & Challenges

• No recovery anticipated for the global car market in 2025, with production expected to contract by 0.5%.
• European car industry struggling with high production costs, slowing EV demand, and Chinese competition.
• Schaeffler’s e-mobility unit faces significant losses, with a projected negative EBIT margin between -14% and -17%.
• Acquisition of Vitesco aimed at strengthening Schaeffler’s position in the EV market, but short-term profitability remains uncertain.
• U.S. tariffs on Mexico and Canada will increase costs, which Schaeffler plans to pass on to customers, potentially leading to higher inflation in the sector.
• Company undergoing major restructuring, cutting thousands of jobs, and shutting down plants across Europe to improve profitability.
• Operating margin fell sharply from 7.3% to 4.5% in one year, prompting Schaeffler to cut its dividend nearly in half to 25 euro cents per share.
• EBIT margin forecast for 2025: between 3% and 5%, indicating continued financial struggles.

Schaeffler’s E-Mobility Unit Faces Overwhelming Losses Amid European EV Slowdown

Schaeffler, a leading German car parts manufacturer, has been aggressively expanding into electric vehicle technology, but the European EV market slowdown has hit its e-mobility unit hard. The company predicts a negative EBIT margin of -14% to -17% in 2025, underscoring the challenges in transitioning from internal combustion engines to electric drivetrains.

To strengthen its electric powertrain portfolio, Schaeffler acquired Vitesco Technologies, but integration costs and market headwinds are weighing on profitability. CEO Klaus Rosenfeld acknowledged that 2025 will remain volatile, stating:

“Of course, 2025 will continue to be characterized by instability. Our cautiously optimistic outlook reflects that.”

Despite heavy investments in EV technology, Schaeffler faces an uphill battle as demand for electric vehicles in Europe slows down, affected by high production costs, supply chain disruptions, and increasing competition from China’s expanding EV industry.

Impact of U.S. Tariffs: Schaeffler to Pass Costs on to Customers

Adding to its financial burdens, Schaeffler is also dealing with U.S. tariffs on Mexican and Canadian imports. CEO Rosenfeld stated that tariff-related costs would be passed on to customers, which could contribute to higher inflation in the global auto parts market.

• U.S. tariffs on Mexico and Canada will increase production costs for Schaeffler, but the company sees the impact as manageable due to its localized operations.
• Customers will ultimately bear the brunt of rising costs, as Schaeffler cannot absorb all tariff-related expenses.
• Rosenfeld warns that tariffs will eventually contribute to inflation, adding more pressure on automakers and parts suppliers.

Global Auto Production to Contract in 2025, European Market Under Pressure

Schaeffler’s outlook aligns with concerns from other auto suppliers, who anticipate global car production to decrease by 0.5% in 2025. Several factors contribute to this negative forecast:

• High manufacturing costs in Europe, making it difficult for local automakers to compete with Chinese EV manufacturers.
• Uncertain demand for electric vehicles, with buyers hesitant due to charging infrastructure challenges and high battery prices.
• Automakers shifting production to cheaper markets, further straining European parts suppliers.

In response to these pressures, Schaeffler is restructuring its business, closing factories, and cutting thousands of jobs across Europe. The company’s operating margin collapsed from 7.3% to 4.5% in just one year, signaling deep-rooted financial challenges.

Restructuring, Dividend Cut & 2025 Profitability Forecast

Schaeffler has embarked on a major cost-cutting initiative to restore its financial health:

• Multiple European plants to be shut down, reducing operational expenses.
• Thousands of job cuts planned, affecting employees across various divisions.
• Dividend cut from 45 euro cents to 25 euro cents per share, reflecting lower profitability.
• EBIT margin guidance for 2025 set at 3%-5%, down from previous years, highlighting a difficult road ahead.

Despite the negative outlook for its core automotive business, Schaeffler sees opportunities outside the automotive sector. CEO Rosenfeld noted:

“We can and need more. Schaeffler can do more than just cars.”

This suggests the company may diversify into other industrial sectors to offset declining automotive profits.

Final Thoughts: A Tough Road Ahead for Schaeffler & the European Auto Industry

The car market downturn in Europe and the U.S., coupled with rising competition from Chinese automakers and slowing EV adoption, presents significant challenges for Schaeffler in 2025.

Key Takeaways:

• No rebound expected in global auto production next year (0.5% contraction forecast).
• Schaeffler’s e-mobility unit faces -14% to -17% EBIT margin, despite acquiring Vitesco Technologies.
• European automakers struggling with high production costs and Chinese EV dominance.
• U.S. tariffs on Mexico and Canada will lead to higher costs, passed on to customers.
• Schaeffler cutting thousands of jobs & closing plants across Europe to improve profitability.
• Dividend cut nearly 50% (from 45 cents to 25 cents per share), signaling weak financials.
• Schaeffler may expand beyond the auto industry to explore new business opportunities.

With no significant improvement expected in the global auto market in 2025, auto parts suppliers like Schaeffler must navigate economic instability, cost pressures, and shifting industry dynamics. The company’s focus on e-mobility, cost-cutting, and diversification will be crucial in determining its long-term survival and growth in a rapidly evolving automotive landscape.