ZF confident in auto market despite coronavirus outbreak

German auto supplier ZF is confident in the potential of the automotive market despite the novel coronavirus epidemic that is affecting over 100 countries and regions in the world.

Carmakers from Volkswagen to GM are temporarily closing their manufacturing facilities in Europe and North America due to the outbreak. In China, where the epidemic is basically curbed, carmakers are revving up production.

"At present, we are witnessing markets collapsing overnight," said ZF CEO Wolf-Henning Scheider at the group's annual press conference.

He said the current situation has made forecasting the company's 2020 business output impossible, but ZF remains confident and is preparing to ramp up production at plants in Europe and the US after carmakers resume production.

In Asia, ZF has resumed production. In China, the continent's largest market, plants have seen their production returning to 90 percent of the normal level, he said.

"We will continue to stand by our customers and suppliers as a reliable business partner and support them when they need us," Scheider said.

China was ZF's third-largest market in 2019 after the United States and Germany, with sales revenue reaching 5.8 billion euros.

Besides resuming plant production, ZF inked a deal in early March to build a new joint venture in China.

Located in Northeast China's city of Shenyang, the joint venture will develop and produce electric motors and components for various vehicle applications.

The joint venture will also supply components for the new ZF hybrid transmission, the company said. Volume production at the joint venture is expected to start in 2021.

Last year, ZF's global sales revenue was 36.5 billion euros, which represented a 1.9 percent decrease from 2018.

"The general economic climate and special challenges connected to the overall transformation of our industry had a tangible impact on our business last year," Scheider said.

"Nevertheless, we won several high-volume orders, including for the next generation of our hybrid-enabled 8-speed automatic transmission and for electric drives for cars and buses."

Despite the challenging environment, ZF increased its research and development expenditure to 2.7 billion euros, accounting for 7.3 percent of its sales revenue. The figure was 6.7 percent in 2018.

"When we overcome the current crisis, we want to continue to invest in future technologies in a focused manner. This will enable us to further expand our competencies as a leading systems supplier," Scheider said.

ZF said participation and partnerships play a decisive role in the company's research and development, particularly in autonomous driving.

These include, for example, the acquisition of a 60-percent stake in a Dutch company called 2getthere, an established supplier of autonomous electric passenger transport systems, and the recently slated cooperation with Microsoft to improve development processes and ramp up ZF's software capabilities.

"This is important for our customers who require flexible cooperation and short delivery times for software updates," Scheider said. "In addition, we will be able to develop software even if the hardware is not yet available. ZF will also offer software solutions as individual products in the automotive market."