Trade Tensions, Structural Shifts in Auto Sector Cast Shadow Over 2025: Mahle CEO

German automotive components manufacturer Mahle is preparing for what its leadership has described as a “landmark year,” as the company contends with a challenging global business environment marked by economic headwinds, trade friction, and structural shifts in the mobility sector.

According to Arnd Franz, Chairman and Chief Executive Officer of Mahle, the business will remain demanding or even difficult for the foreseeable future. The transformation of the industry—and of Mahle—will be dominated by economic policy and regulatory decisions. “Only when the political and economic conditions have durably improved will Mahle be able to create employment again. 2025 will be a landmark year,” he said.

“We expect that there will once again be little dynamism in the market in 2025. Production of passenger cars and light commercial vehicles in Europe and North America will continue to shrink. The U.S. import tariffs will burden vehicle production in Europe, Japan, and South Korea significantly. Slight growth is only expected in China and India,” Franz said.

Despite the cautious tone, Mahle is moving forward with its long-term transformation strategy, Mahle 2030+, which has now entered its second phase: Business Excellence. The strategy focuses on improving profitability, driving process optimization, and reinforcing operational discipline.

“We will keep our foot on the gas pedal for the implementation of our group strategy… We are striving for sales growth with sustainable profitability as our top priority,” Franz said.

China Remains Essential

The German automotive supplier has placed China at the heart of its global growth strategy, calling the country “essential” to both innovation and market expansion. As the company navigates a challenging global environment, Franz said China offers unique advantages in scale, speed, and technological advancement—especially in the area of new energy vehicles.

“An important market where we are determined to continue our growth is China. China is simply essential,” Franz said.

Mahle currently employs around 7,000 people across more than 30 plants in China, including 500 engineers at two advanced technology centers. The company develops and produces parts in China, not just for the domestic market, but also for global supply chains.

With regard to new energy vehicles, Franz said Chinese OEMs have shown growing interest in Mahle’s thermal management modules, air conditioning systems, electric compressors, and charging electronics. “Very recently, we received a contract for our DC/DC converter, which is used in electric vehicles, from an international car manufacturer in China,” he said.

Beyond market size, Franz emphasized that China’s ability to rapidly scale innovation and production makes it an invaluable learning environment for the company’s global operations.
“China is important for us because of its size and its speed. If you want to bring technology onto the roads fast, China is the right place. China is our boot camp,” he said.

Franz added that the company’s experiences in China—particularly in agile development and efficient manufacturing—are already benefiting other regions. “What we learn and train in China, such as significantly faster and more efficient development and production processes, will not only make us strong in China. It will also bring benefits in other regions of the world.”

Europe’s BEV Transition

As Europe pushes ahead with its planned ban on internal combustion engines by 2035, Mahle has sounded the alarm on the unintended industrial and social consequences of a “battery-only” transition. Franz warned that the current direction threatens hundreds of thousands of jobs and called for urgent regulatory reform.

“In view of the ban on internal combustion engines from 2035 onwards, our industry faces massive challenges. In Europe, two-thirds of jobs within the group depend on the internal combustion engine. This technology offers five times as many jobs as e-mobility,” Franz said.

According to data from the European Association of Automotive Suppliers (CLEPA), nearly 56,000 jobs have already been lost across Europe in the past four years due to the ongoing powertrain transition. CLEPA projects this figure could balloon to 275,000 jobs lost by 2040 in a scenario where battery-electric vehicles (BEVs) become the only legally viable option.

Franz emphasized that while Mahle fully supports the goal of reducing CO₂ emissions, this must be done in a way that preserves industrial capacity and employment. He called for a more technology-neutral approach that includes hybrids and renewable fuels alongside BEVs.

“We must deal honestly with the question of how the path to carbon neutrality is to be accomplished—not only in terms of climate protection, but also with respect to employment and social policy,” he said.

Franz welcomed the European Commission’s decision to advance the review of CO₂ regulations, originally scheduled for 2026, as a vital opportunity to introduce more inclusive solutions.

“The EU Commission must specifically state how CO₂ requirements can be shaped in a technology-neutral way. No other market in the world has opted solely for battery-electric vehicles—not even the largest market for BEVs, China. Europe must abandon its narrow ‘battery-only’ approach as this will lead to an industrial and climate policy cul-de-sac,” Franz said, adding that consumer preference will ultimately determine the market’s direction and that policymakers should support—not restrict—that choice.

Restoring Europe’s Competitiveness

In addition to regulatory concerns, Mahle is also grappling with the impact of recent U.S. import tariffs, which Franz described as damaging to global automotive supply chains.

“As a globally active company committed to free and fair trade, this trade policy is difficult to understand. Tariffs are fatal for supply chains and will result in additional costs and, ultimately, higher consumer prices in the U.S.,” Franz said.

The Mahle CEO called on political leaders to pursue sustainable trade solutions and urged greater European unity and economic strength to navigate current challenges.

Pillars of Growth

As Mahle navigates a rapidly evolving mobility landscape, the company is doubling down on two emerging growth pillars: its Lifecycle and Mobility Services business and an expanding non-automotive portfolio. According to Franz, both areas are set to play a crucial role in ensuring long-term profitability and strategic diversification.

“A further pillar of growth and earnings is our Lifecycle and Mobility Business Unit. We are pursuing ambitious sales and profitability targets in our business with spare parts and services,” Franz said.

Traditionally known for its automotive components such as filters and piston rings, Mahle has over the years transformed into a holistic mobility solutions provider. Its current offering includes a wide range of diagnostic technologies, workshop equipment, and services that support both passenger and commercial vehicles across their entire lifecycle. Franz emphasized that this evolution aligns with broader mobility trends, including the rise of fleet-based transport, urban mobility solutions, digital connectivity, and diversified powertrains.

“Mahle will benefit from these trends and develop digital offerings that link drivers and fleet operators directly with service partners—workshops, charging infrastructure providers, parking services, and insurers.”

Non-Automotive Business

Franz also highlighted the company’s growing focus on non-automotive applications—a sector he described as holding “significant untapped potential.” Mahle aims to achieve above-average growth in energy and infrastructure, leisure and logistics, industrial equipment, and special vehicles.

“We intend to focus more strongly on our potential in non-automotive business and achieve above-average growth in these segments,” he said.

One of Mahle’s standout successes has been in the e-bike sector, where its SmartBike Systems now power more than 60 cycle brands across all segments. The company also has active engagements in rail, marine, defense, and industrial thermal systems.

In 2024, Mahle’s revenue from non-automotive business reached €700 million, with Franz projecting the figure to surpass €1 billion within five years. He added that the company is currently exploring even broader opportunities in this space. “The potential is significantly greater. Therefore, we are taking a close look at this business field,” he said.