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Recently, according to media reports, the German Continental Group, a giant supplier to the auto industry, is planning to go public through a spin-off of its core automotive division. The auto division may go public by the end of 2025, the company said in an official statement last week. According to relevant data, the automobile department, as the core department of Continental Group, has annual sales of 20.3 billion euros and accounts for half of the business of Continental Group. Its business covers a wide range of businesses, such as self-driving, auto software, auto parts and so on, and is the main source of income for Continental Group.

In response to the listing of the spin-off of its core car division, Continental CEO Ni Nikolai Setzer said that the growth of electric vehicle sales in Europe was slowing, but the demand for in-car software was increasing. In this context, I want to spin off the company through the listed automobile sector in order to cope with the rapid changes in the market. According to official news, the specific implementation of the spin-off plan will be decided in the fourth quarter or submitted to the annual general meeting to be held on April 25, 2025 for approval. If approved by shareholders, the spin-off will be completed by the end of 2025, when the automotive division will be listed independently on the Frankfurt Stock Exchange.

In recent years, with the rapid development of new energy vehicles, the market share of traditional parts and components enterprises has also been reduced, facing unprecedented pressure. Sales at Continental also fell, while net losses increased.

In the third quarter of 2023, the group's sales were 10.2 billion euros, down 1.5 per cent from a year earlier, according to data. Of this total, Tire Group's sales in the third quarter were 3.4 billion euros, down 5.4 per cent from a year earlier. ContiTech's third-quarter sales were 1.7 billion euros, down 1.0% from a year earlier. Sales of the automobile group rose 1.8 per cent to 5 billion euros in the third quarter. Compared with the previous two quarters, although the auto group's earnings improved, it still lost money, with a cumulative loss of $28.23 million in the first three quarters of last year. In the first quarter of this year, Continental Group's sales were 9.8 billion euros, down 5% from the same period last year. The net loss in the first quarter was 53 million euros. As a reference, the net profit in the same period last year was 382 million euros.

The loss increases, in order to conserve the strength in order to cope with the predicament. Continental has to downsize its staff to reduce costs. Last year, officials revealed that costs would be cut. The Automotive Group sector has been simplified and its business and administrative structure has been adjusted, hoping to cut costs by 400 million euros a year by 2025. In February this year, officials announced the launch of a global layoff plan. According to officials earlier, 1750 R & D jobs will be cut in the automotive business, while about 5400 administrative positions will be streamlined, with a total of about 7150 layoffs, or about 3.6 per cent of Continental's global workforce. Officials say the layoffs will be completed by the end of next year.

In fact, under the background of the rapid development of new energy vehicles, it is not only the Continental Group that is facing difficulties. Other auto parts suppliers are also facing increased losses and shrinking market share. Since the beginning of this year, a number of auto parts giants have started large layoffs one after another. In January, auto parts supply giants such as Zaifu and Valeo announced layoffs. On January 17th, ZF announced plans to cut 12000 jobs in Germany over the next six years. On January 19th Valeo announced that it would cut 1150 jobs worldwide in order to improve the group's competitiveness and efficiency in the context of car electrification. On the same day, Bosch announced that it would cut 1200 jobs by 2026 due to sharp increases in energy and raw material costs, recession and high inflation, of which 950 would be laid off in Germany.

At present, in the era of electrification and intelligence of the automobile industry, the traditional industry giants have to take certain measures in order to cope with the changes in the market. For the Continental Group, the spin-off of the Automobile Group will help to ease the operating pressure. At the same time, if the listing is successful, it is also conducive to access to capital injection channels, which is undoubtedly a favorable strategic choice for the Continental Group, which is currently at a loss.

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