(Yicai) Sept. 3 -- Volkswagen Group and Mercedes-Benz have initiated investigations into Changzhou Xingyu Automotive Lighting System after the Chinese supplier of vehicle lamps terminated contracts with more than 100 fresh graduates.

Volkswagen attaches great importance to the complaints concerning Xingyu and has immediately launched a dedicated investigation, which is ongoing, a spokesperson for the German company’s China business told Southern Metropolis Daily. Respect for workers’ lawful rights and interests runs through Volkswagen’s entire supply chain management, the spokesperson added.

The conduct described does not align with Mercedes-Benz’s corporate principles, the company’s Whistleblower System Business and People Protection Office said in an email in response to complaints by laid-off graduates.

Mercedes-Benz expects its partners to observe its corporate principles, the Whistleblower System BPO noted, adding that it intends to forward the report to colleagues acting as external business partners in the relevant area for further review.

Xingyu hired a large number of master’s degree students who would graduate this year during last year’s autumn recruitment, National Business Daily reported. But on Aug. 8, the firm’s human resources department informed them they should either resign or be reassigned to frontline positions, citing poor market conditions and operational issues.

Xingyu has recruited a total of 440 graduates from the 2026 class, of whom 107 had their labor contracts terminated, according to a report released by Changzhou’s HR and social security bureau on Aug. 25. The negotiation process was simplistic and harsh, and communication was insufficient. The company has apologized, and the HR director was suspended.

However, Yicai found from Xingyu’s public information that the firm does not have an HR director position as mentioned in the report.

On Aug. 26, Xingyu issued an apology letter, acknowledging decision-making errors and management oversights. It pledged to provide the laid-off graduates with free accommodation and job-seeking subsidies for three months, which could be extended to six months if they do not find a new job in the period.

Xingyu has been reflecting deeply on the matter and offers its sincere apologies, Chairwoman Zhou Xiaoping said during the semiannual earnings conference call yesterday. The company will review and rectify its employment system and procedures to “genuinely safeguard workers’ lawful rights and interests,” she added.

Xingyu’s employment structure has greatly shifted in recent years, according to its Hong Kong Stock Exchange listing application and subsequent financial statements.

Xingyu had about 7,500 employees at the end of last year, down from 10,400 at the end of 2024. Meanwhile, its outsourced labor expanded to 10.9 million working hours in 2025 from 2.4 million the year before, with related costs up 24 percent to CNY302 million (USD44.6 million). In the period, the company also failed to make full social insurance and housing provident fund contributions for some employees.

Founded in 1993, Xingyu is one of China’s largest manufacturers of complete automotive lamp assemblies. It was listed on the Shanghai Stock Exchange in 2011, and it is now pursuing a secondary listing on the HKEX.

Media outlets reported that Hong Kong Exchanges and Clearing has received complaint emails from the fresh graduate about the contract terminations and passed them to its Listing Division, which is examining the matter as an individual case.

According to Xingyu’s listing prospectus, revenue grew from CNY10.2 billion (USD1.5 billion) in 2023 to CNY15.3 billion in 2025, with the annual growth rate down from 24 percent to 15 percent in the period. The company’s main clients include German, Japanese, US, French, and Chinese carmakers, with its top five customers contributing 65 percent of its revenue last year.

High customer concentration means that any change in a core client’s supplier rating can directly affect revenue, according to a commentary by the Zhangjiang Platform Economy Research Institute in Shanghai's Pudong New Area.

For companies expanding overseas capacity and pursuing Hong Kong listing, compliance in employment procedures is no longer confined to domestic labor law, the Zhangjiang Platform Economy Research Institute noted. Supplier codes of conduct from multinational carmakers and stock exchange listing rules both provide ready channels for such complaints.

Xingyu's shares [SHA: 601799] were trading down 2.2 percent at CNY76.1 (USD11.31) as of 11 a.m. today. They have fallen more than 19 percent since the layoff news first broke out in early August and over 51 percent since its peak of CNY156.72 (USD23.32) on Feb. 13.

Editor: Futura Costaglione