ZF sharpens its tools strategy aimed at expansion in China

German auto parts maker ZF Friedrichshafen is promoting its "in China, for China" strategy to foster better growth in the country, already one of its largest markets worldwide.

Since its arrival in China in 1980, the company has developed a growing network composed of two regional headquarters, two research facilities and almost 40 manufacturing plants.

ZF is also scheduled to produce its 8-speed automatic transmissions domestically in the third quarter of this year, another of its localization efforts. It has set the goal of complete localization over the coming years.

Holger Klein, a ZF board member, said the company is expecting to catch up to "China speed" in the country, which accounted for some 90 percent of its sales in the Asia-Pacific region.

He explained electric car startups and technology companies moving into the industry are doing things faster, so ZF has to speed up its research and development to meet their demands.

Its two research facilities now hire over 1,000 engineers, and a third facility will open in the near future.

"Technology development is fast here. If you ask about the most advanced thinking about things like V2X or smart cities, it is probably in China," said Klein.

He said another aspect of "China speed" is that local customers usually demand replies in a far shorter period of time, so it will not work if the decisions have to be made at the global headquarters in Germany.

He said that is why he has been based in Shanghai from this year, together with Renee Wang, president of ZF China and vice-president of ZF Asia-Pacific.

The company expects the Asia-Pacific region to account for 30 percent of its global sales by 2030, while China will continue to be the most crucial contributor in the region.

"In China, we offer our most advanced products to not only American or European carmakers' joint ventures but more importantly, we emphasize our relationships with local Chinese OEMs," Wang said.

"Some of them, say SAIC, Geely and Great Wall Motor, are really excellent. Their determination and quality show great potential to stand out, which would be crucial to our business in China and the Asia-Pacific region," she said. ZF is already joining hands with local partners to explore the latest technologies.

The company said it will globally premiere a passenger car with Level 2 autonomous driving functions with a Chinese carmaker at the forthcoming Shanghai auto show later this month.

ZF also held an Asian premiere for an electrified and automated prototype with its latest products in terms of steering, radars and driver-assist functions in late March.

Globally, the company is expecting high demand in automated driving functions in commercial vehicles as well, which is believed to be one of the reasons behind its takeover of Wabco, a US braking system manufacturer for commercial vehicles.

ZF announced Thursday that it would acquire Wabco for $136.5 per share, meaning a total equity value of about $7 billion. ZF is expecting to close the transaction at the beginning of 2020.