ZF Group sees room for growth in Thailand

Corporate July 14, 2014 00:00

By Erich Parpart
The Nation

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Auto-parts supplier keen to expand in commercial vehicles and services

ZF Friedrichshafen – commonly known as ZF Group – is looking to expand its footprint in Asia-Pacific due to the growth of the region’s automotive-parts industry, and sees Thailand as an important strategic location for its expansion in the commercial-vehicle and services segments.
Germany-based ZF is a worldwide automotive supplier for driveline and chassis technology complete with after-sales service, which in total generated revenue of 16.8 billion euro (Bt735 billion) last year, with income of 3.18 billion euro in Asia-Pacific. Capital expenditure amounted to 123 million euro.
The company is looking to expand its overall revenue to 20 billion euros next year, and to 40 billion euros by 2025. 
It made a profit of 756 billion euros last year and has a presence in 11 Asia-Pacific countries, including component supplier ZF Limited in Bangkok and suspension-assembly plant ZF Lemforder in Rayong.
To meet its growth target, the group has set aside 1 billion euros for investment in the coming years.
“The investment rate of ZF in the last two or three years has been heavily influenced by the success of our passenger-car transmission business, but we will continue to invest in all of our market segments. We will particularly continue to invest in Asia-Pacific because it is the most important world market, and that holds true for all of our business segments, including commercial vehicles,” said Fredrik Staedtler, ZF’s senior executive vice president of commercial vehicle technology.
He said that for passenger cars, Thailand had always been on the map for ZF in recent years and there was a good basis for continuing to develop further in this side of the business.
Since the Kingdom is already a very important market for commercial vehicles, and light commercial vehicles in particular, the group is looking to expand it even further, he added.
ZF supplies component parts for driveline, suspension and steering systems, and low-floor technology to Thailand’s bus-body manufacturers, such as Cherdchai.
The group also supplies transmission to the Bangkok Mass Transit Authority via auto-makers, including Isuzu, Hino, Mercedes-Benz and Daewoo, while manufacturing and supplying complete front and rear axle systems to BMW, Ford, General Motors and Mercedes-Benz.    
“There is no specific plan for Southeast Asia for localised investment, but the market is important and if the business case is there and the numbers are right, and this is primarily a volume-driven exercise, we would go into the Asia-Pacific market to produce local for local.
“Nevertheless, before local production comes expansion in competency when it comes to supply development, material management, and research and development expertise,” said the executive.
In terms of development and R&D, Staedtler said more and more ZF development work would have to be performed in the local markets, and the group firmly believed that this would significantly reduce time spent in the development cycle and also support the development of the right solution and design-to-market approach, which could only be done with a strong base in the countries in which it has a presence.
The group spends on average 5 per cent of its revenue on R&D. The allocation amounted to 836 million euros last year.
As for services, which accounted for 20 per cent of ZF’s revenue, Ulrich Walz, a member of the board of directors of ZF Services, said Asia-Pacific and North America were two of the most important markets abroad for ZF Services and the group was planning to drive for disproportionately high growth in these regions.
“In the future, ZF Services is looking to offer its services more and more in growth regions such as Asia-Pacific and this is a big challenge for us, because in these markets we see a completely different [picture for] car parts, distribution and structure,” he said.
To realise the overall proportional growth in essential areas like Asia-Pacific, Walz said ZF would have to focus on development of its product portfolio to meet demand in the region and concentrate on developing new distribution channels, as there is not enough “exaggerated landscape” in terms of distribution and service network in fast-growing economies.
“In these growth markets, we have to expand our footprint in terms of re-manufacturing and service activities because it is clearly does not make sense to remanufacture the product in Germany and export to countries where we want see the future growth of our activities,” he explained.