Recently, mainland China’s car light company Xingyu Stock has terminated labor contracts with 107 newly hired fresh graduates. The related complaints have been forwarded to the Hong Kong Stock Exchange’s Listing Department for processing, triggering a special investigation by the General Motors on the automotive sector. Analysts believe that labor compliance disputes may increase scrutiny for listing and affect customer orders.
According to reports from mainland Chinese media, the complaints have been transferred to the Listing Department of the Hong Kong Stock Exchange for current case verification. Volkswagen China stated on September 1 that they have initiated a special investigation into supplier-related complaints. Screenshots of emails circulating online indicate that Mercedes-Benz has also received reports, yet Mercedes-Benz has not publicly confirmed this.
Multiple involved fresh graduates have reportedly submitted materials such as recordings, employment notices, and chat records to the Hong Kong Stock Exchange, the compliance channels of the EU supply chain, and Xingyu’s customers.
Cao He, the CEO of Quanlian Auto Dealer Investment Management (Beijing) Co., told Economic Observer that the compliance reviews of Volkswagen and Mercedes-Benz could potentially involve Xingyu’s Hong Kong listing, with a more direct risk being a decrease in customer orders. In 2025, the top five customers of Xingyu accounted for 64.7% of total sales.
Zhou Jianbing, Chief Analyst at Guojin Securities, believes that this incident poses a direct impact on Xingyu’s Hong Kong listing, making the short-term listing prospects bleak. If there are large-scale labor disputes or flaws in labor rights, the Hong Kong Stock Exchange may raise queries, increasing uncertainties surrounding the listing.
On July 29, Xingyu submitted its second listing application to the Hong Kong Stock Exchange and obtained overseas listing filing approval from the China Securities Regulatory Commission on August 14. However, completing the filing does not guarantee listing approval; the company still needs to undergo a hearing at the Hong Kong Stock Exchange.
Xingyu recruited a total of 440 fresh graduates this year, with most entering positions in research and development, technology, and management training. Several individuals involved stated that a little over a month after starting, the company asked them to accept compensation equivalent to half a month’s salary, resign for personal reasons, or be transferred to the production line for assembly work.
The Human Resources Department of Changzhou City, Jiangsu Province, announced on August 25 that Xingyu ultimately terminated labor contracts with 107 individuals, describing the negotiation process as “simple and lacking sufficient effective communication,” leading to the suspension of the company’s Human Resources Director.
Following this, Xingyu issued an apology and proposed providing a 3-month subsistence allowance to those seeking employment; individuals who remain unemployed by the end of November could receive a compensation of 6 months’ salary.
According to the Hong Kong IPO prospectus, Xingyu and its Foshan subsidiary had exceeded the legal limit of 10% for dispatched labor personnel relative to the total workforce, which was not rectified until the end of May and February this year.
Between 2023 and the first quarter of 2026, shortcomings were found where the company had not fully paid social insurance and housing provident fund for some employees, with the related discrepancies accounting for 1.4%, 1%, 0.8%, and 0.7% of the respective period’s operating income.
In the first half of this year, Xingyu’s operating income was 6.884 billion yuan (RMB); a mere 1.87% increase year-on-year, with a net profit of 669 million yuan, a 5.26% decrease, and a 17.28% decrease in net cash flow from operating activities.
After the termination incident escalated, Xingyu’s recruitment of part-time workers was also affected. Starting in September, Xingyu increased the incentives for part-time workers from 2 yuan per hour to 3 yuan per hour, bringing the total hourly wage to 23 yuan including the base pay. A labor recruitment intermediary mentioned that due to the controversy following the termination incident, the company found it challenging to recruit workers, hence the raise in hourly wages.