Traditional ICE Parts Will Falter Amid Global Supply Disruptions

Key Takeaways

• Bosch faces revenue and margin risks due to slow EV transition, rising costs, and shrinking market share from automaker insourcing and robust Asian competition.
  
• Supply chain disruptions, high R&D demands, and regulatory pressures threaten the company's profitability and reliability as legacy products become obsolete.
  
• Bosch's localization, electrification focus, and strategic realignment position it for strong, resilient growth and margin expansion amid global automotive and mobility shifts.

Catalysts

Engages in the manufacture and trading of automotive products in India and internationally.

• The accelerating global transition to electric vehicles, coupled with tightening emissions regulations, is set to sharply reduce long-term demand for Bosch's traditional internal combustion engine components-which remains a significant portion of its Mobility revenue base-leading to sustained top-line revenue declines as product obsolescence accelerates.
  
• Intensifying geopolitical fragmentation and supply chain nationalism, exemplified by Chinese export restrictions on EV components and rare earth materials, threaten to drive up material costs and disrupt Bosch's manufacturing flow, undermining both gross margins and revenue reliability into the next decade.
  
• The slow pivot in Bosch's automotive business from legacy ICE to EV technologies, as compared to faster-moving competitors globally and locally, exposes Bosch to the risk of losing share in high-growth new mobility platforms while its cost base remains structurally high, resulting in potential stagnation or contraction of net margins.
  
• Automakers' push for vertical integration-specifically insourcing of critical EV components, semiconductors, and software-will bypass traditional suppliers like Bosch, shrinking its addressable market and pressuring both topline growth and profitability in key future-facing segments such as power electronics and ADAS.
  
• Mounting cost pressures driven by the need for continual high R&D spend in electrification, automation and connectivity, combined with heightened price competition from lower-cost Asian rivals, will likely erode Bosch's long-term operating leverage and keep return on invested capital under persistent pressure.

Bosch Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Bosch compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Bosch's revenue will grow by 8.3% annually over the next 3 years.
• The bearish analysts assume that profit margins will shrink from 14.5% today to 12.0% in 3 years time.
• The bearish analysts expect earnings to reach ₹27.9 billion (and earnings per share of ₹945.05) by about August 2028, up from ₹26.6 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 41.7x on those 2028 earnings, down from 42.7x today. This future PE is greater than the current PE for the IN Auto Components industry at 29.0x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.21%, as per the Simply Wall St company report.

Bosch Future Earnings Per Share Growth

Risks

• Bosch's strong foothold in the Indian automotive market is supported by secular trends such as expanding electrification, the rapid adoption of OBD II emission norms, and accelerating EV momentum in two
• and three-wheelers, which could underpin multi-year volume and revenue growth despite global uncertainties.
  
• The company's ability to localize manufacturing and ramp up capacity in core growth segments like two-wheelers and power solutions is leading to improved cost structures and material cost efficiencies, directly supporting margin expansion and net earnings resilience.
  
• Bosch's global leadership in EV technologies, proven dominance in competitive markets like China, and ongoing advancements in electronics and vehicle control systems position the company to benefit from rising demand for connected, sustainable mobility, bolstering long-term consolidated revenues.
  
• Strategic portfolio realignment-including divestment of lower-growth or non-core businesses (such as building technologies) and reallocation of resources into core mobility and electrification segments-may enhance overall earnings quality and margin stability.
  
• Continued investments in exports, productivity upgrades, and local as well as global R&D collaborations offer Bosch new revenue streams and greater export competitiveness, supporting sustainable growth in both top-line sales and profit margins over the medium-to-long term.

Valuation

• The assumed bearish price target for Bosch is ₹26900.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Bosch's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹43013.0, and the most bearish reporting a price target of just ₹26900.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be ₹233.0 billion, earnings will come to ₹27.9 billion, and it would be trading on a PE ratio of 41.7x, assuming you use a discount rate of 14.2%.
• Given the current share price of ₹38606.5, the bearish analyst price target of ₹26900.0 is 43.5% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.