Summary:
The shattered career dreams of hundreds of recent graduates have triggered an urgent compliance investigation by a German automotive giant across the ocean. Xingyu Automotive's "choose one of two" forced-resignation controversy has detonated far more than a labor dispute—it's an ESG compliance landmine in the global supply chain.
This is the 2,132nd original article by Global Zero Carbon.
In early autumn 2026, hundreds of fresh graduates with career aspirations were dealt a rude awakening.
According to public reports, about 440 recent graduates joined Xingyu Automotive, a leading domestic automotive-lighting company, in July 2026.
Just a month later, the company's HR, citing a "poor industry market environment," held successive meetings to persuade more than 100 campus recruits to resign.
For these new employees—mostly master's degree holders originally hired for R&D and technical roles—Xingyu offered two options: sign a voluntary resignation agreement and receive half a month's salary as compensation.
Those who refused would be forcibly transferred to frontline assembly-line positions, with pay switched to piece-rate wages for general workers. In the end, 107 recent graduates were forced to leave.
Adding to the criticism, several recent graduates provided recordings and reports to media showing HR hinted during talks that declining to sign could affect future background checks.
On Aug. 25, Changzhou's human resources bureau said the company's negotiation methods were "simple and blunt, lacking sufficient and effective communication."
Meanwhile, Xingyu's shares have fallen nearly 50%, from above 147 yuan in late May to around 74 yuan at Sept. 3's close.
Source: Refinitiv
Facing public pressure, Xingyu apologized on Aug. 27, admitting "management decision errors" and offering remedies including job-search subsidies, extended housing, and six months' salary compensation.
None of this is new: labor disputes and revoked offers to graduates are annual occurrences.
What's new is that for Xingyu, deeply embedded in global supply chains, the dispute is turning into an ESG compliance storm for the global automotive supply chain.
The dispute has moved beyond internal HR matters, triggering supply-chain compliance checks and ESG due diligence by Volkswagen, Mercedes-Benz, BMW and other leading European automakers, according to reports.
Previously, some Apple suppliers have been dropped from the supply chain for poor ESG performance.
ESG has been a buzzword for five or six years. Yet many companies still treat it like making a brochure: hire a third party, gather data, design, write a few promises, and produce a thick report to polish their image.
Now, fresh graduates are using these polished standards, regulations, commitments, and initiatives to question the substance of ESG: Is this real? Show us proof.
A Glossy Report Can't Survive the 'Stay Away' Test
In the employee section of Xingyu's 2025 ESG report, the opening highlights campus recruitment and university partnerships as hiring highlights.
Xingyu's 2025 ESG report shows the company held 121 campus recruitment events and signed 564 graduating students that year.
Source: Xingyu
For employee communication, it disclosed respecting employee opinions, adopting a Workers' Congress System, and fostering an open, trusting, and smooth communication environment.
Yet in practice, Xingyu forced graduating students into a mandatory either-or choice—a touch of dark humor.
Moreover, Caixin's investigation found that Xingyu has used job transfers to pressure employees into quitting about once every two to three years. Those pushed out include not only recent graduates but also middle-aged workers with families.
The controversy over rescinded offers to graduates has thus exposed more of Xingyu's past labor practices.
Xingyu's Hong Kong IPO prospectus and annual reports show the company had about 10,400 employees at the end of 2024, falling to roughly 7,500 by the end of 2025 — a reduction of nearly 3,000 in one year.
Even as total headcount declined, the scale of labor outsourcing expanded.
The company disclosed that outsourced labor hours rose to 10.874 million in 2025 from 2.384 million in 2022, about 4.6 times the earlier level. Outsourced labor compensation reached 302 million yuan in 2025, up 24.20% year-on-year.
In addition, the prospectus disclosed that the company and its subsidiary Foshan Xingyu had previously used dispatched workers in excess of the regulatory cap of 10%, and that the issue was rectified by May 31, 2026.
During the reporting period, the company also failed to make full social insurance and housing fund contributions for some employees.
As the dismissed workers submitted relevant materials to the Hong Kong Stock Exchange and European customers including BMW, Mercedes-Benz and Volkswagen, this time the risk of layoffs is no longer borne only by workers.
Volkswagen Group on Sept. 1 publicly responded to complaints about labor practices for recent graduates at its first-tier supplier Xingyu Co., saying it had immediately initiated a dedicated compliance investigation, according to Caixin.
Volkswagen said respecting and safeguarding workers' legal rights is a core principle of its global operations, applying across the full supply chain, and that it requires all partner suppliers to strictly enforce labor-rights protections.
That made it the first substantive official response by a major foreign automaker to the cross-border labor dispute involving recent graduates.
Separately, screenshots circulating on social media showed Mercedes-Benz had accepted the case through its Business and People Protection Office, assigning case number WB0011869, classifying the dispute as serious supply-chain labor misconduct and referring it to a compliance team for a deep ESG review.
It remains unclear whether the complaints have been accepted by relevant authorities or will result in regulatory consequences.
The episode underscores that competition for companies expanding overseas has moved beyond products and prices, with governance, labor compliance and social responsibility now baseline requirements for supply-chain entry.
Labor Rights: The Hard Benchmark for Supply Chain Compliance
Within ESG, the environmental pillar often draws the most attention amid global decarbonization, but the social pillar is equally important.
In global ESG frameworks, supply-chain management — including supplier social-standards assessments — and employment and labor relations are key social issues.
According to its 2026 interim report, Xingyu's customers include multinational automakers such as Volkswagen, Mercedes-Benz, BMW, General Motors and Toyota, as well as their joint ventures.
These multinational automakers maintain strict supplier evaluation systems, and only parts companies that meet certain rating requirements are selected.
On sustainability, mainstream global automakers generally require suppliers to complete the Sustainability Assessment Questionnaire, or SAQ, and achieve a corresponding score.
The SAQ is developed and regularly updated by Drive Sustainability, an automotive industry alliance, and its operation is led by CSR Europe.
The alliance comprises 21 automakers, and most of Xingyu's multinational automaker customers are among them.
In addition, Chinese automakers Geely, Chery and Great Wall Motor, as well as Volvo Cars and Polestar, both controlled by Geely Holding Group, are also members of the alliance.
The SAQ includes multiple modules, such as corporate governance, labor rights, health and safety, and business ethics. Suppliers must answer the questions and submit original evidence to support their responses.
In the labor rights module, the SAQ requires companies to standardize recruitment procedures, prohibit practices such as charging deposits or withholding identity documents, and safeguard employees' freedom to resign.
SAQ also requires companies to establish accessible grievance and complaint channels, support anonymous employee feedback, and ensure the confidentiality of these channels and that complainants are protected from retaliation.
If an automaker's final investigation finds that Xingyu's answers in the SAQ do not match the actual situation, Xingyu may face a lower score or even fail to meet the automaker's supplier evaluation standards.
Meanwhile, Germany's Supply Chain Due Diligence Act took effect on Jan. 1, 2023, requiring companies with more than 1,000 employees in Germany to conduct due diligence on their supply chains.
This means German automakers such as Volkswagen Group and Mercedes-Benz must complete the reviews required by the law.
Companies' obligations include appointing a compliance officer; conducting regular risk analyses; issuing a human rights policy statement; establishing preventive measures in their own operations and toward direct suppliers; taking remedial action for violations; setting up a complaint mechanism; conducting due diligence on indirect suppliers; and documenting and reporting on the fulfillment of due diligence obligations.
In addition, EU companies face the Corporate Sustainability Due Diligence Directive, which requires eligible companies to identify, prevent, mitigate and remedy adverse impacts in their own operations and value chains.
Even if Chinese suppliers are not directly subject to EU regulations, they may be indirectly affected by customers' due diligence requirements as part of global supply chains, prompting them to pay attention to labor rights protections, major labor disputes and their handling.
Hong Kong Listings Face Another Major ESG Test
For this dispute over rescinded offers to fresh graduates, responding to the lead company's inquiry is just the beginning.
According to reports, on July 29, Xingyu Co. submitted its H-share listing application to the Hong Kong Stock Exchange, and on August 15 received the CSRC's filing approval for overseas listing. The company is pushing ahead with its "A+H" dual listing plan.
But if Xingyu wants to list in Hong Kong, it will directly face the HKEX's stricter ESG governance requirements.
Starting Jan. 1, 2025, HKEX upgraded its ESG disclosure rules from the ESG Reporting Guide to the ESG Reporting Code, making key performance indicators (KPIs) on environmental and social aspects fully mandatory.
Under the ESG Reporting Code, employee-related topics—covering employment, health and safety, development and training, and labor standards—fall under "Part B," which is subject to mandatory disclosure.
Source: HKEX
Separately, under the Listing Rules, HKEX requires issuers to disclose information on their compliance with relevant laws and regulations that have a material impact on them. Any material deficiencies in labor practices must also be disclosed truthfully.
According to Guancha.cn, after receiving the relevant complaint, HKEX referred the materials to its Listing Division and launched a case-by-case review.
HKEX's disclosure requirements for new listing applicants cover employee information, recruitment policies, labor disputes, material violations, internal controls, and ESG risks.
Applicants must also explain the potential impact of material risks on business operations, financial performance, financing capacity, and the value chain.
This means that if the incident is deemed to have a material impact on corporate governance, supplier qualifications, or customer relationships, Xingyu Auto Parts may need to disclose the full details, potential liabilities, and remedial measures. Sponsors may also need to further scrutinize the company's hiring decisions, labor disputes, and internal controls.
The controversy over "persuading" new graduates to resign comes at a moment when the issue of employee relations is shifting from an internal human-resources problem to a matter of global supply-chain governance.
For Xingyu Auto Parts, properly placating the new graduates is only the first step in crisis management.
To allay concerns from Volkswagen and Mercedes-Benz investigations and pass the Hong Kong Stock Exchange's stringent ESG disclosure review, the company needs more than a simple apology. It must fundamentally restructure its human-capital values and risk-governance framework at the board level.
As ESG awareness rises across society and corporate ESG governance tools become increasingly effective, both domestic and overseas companies—whether suppliers or supply-chain leaders—will face the same challenges and tests.
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Source:
Southern Weekly: Xingyu Auto Parts pushes fresh graduates to resign: Employee rights are not an 'internal affair' of the company; 2026.08.29
Observer Network: Xingyu chairman apologizes again as contract termination turmoil continues; 2026.09.02
Shanghai Securities News: Volkswagen, Mercedes-Benz, BMW respond to Xingyu Auto Parts' mass push of fresh graduates to resign; 2026.09.01
Wall Street CN: Xingyu Auto Parts' Hong Kong IPO path: taking employment support while rescinding offers to fresh graduates; 2026.09.01
Phoenix Auto: Rescinding offers to fresh graduates triggers cascading public opinion earthquake, in-depth review of Xingyu Auto Parts controversy; 2026.09.01
Daily Economic News: Shareholders ask 'stock price has fallen to unbearable levels,' Xingyu Auto Parts responds! Who is the suspended HR director? A peer company is recruiting terminated fresh graduates near its headquarters; 2026.09.03
Caixin: Volkswagen launches investigation into Xingyu Auto Parts labor dispute; why is supply chain oversight an obligation for multinational automakers? 2026.09.02
Caixin: Xingyu's layoffs of fresh graduates face cross-border rights defense; partner automakers launch compliance reviews; 2026.09.01
Fresh graduates laid off immediately after leaving school face significant losses.
After mass layoffs of fresh graduates, the 'first stock of car lights' publicly apologized.
The HKEX ESG Academy provides rules and regulations.
Drive Sustainability lists its members.