Locals Respond Faster

ZF Board Member Peter Lake talks about changing markets and customers, and about the company's localization strategy.

What’s the current state of the global automotive market?

At the moment, the situation is generally positive. Apart from some unfortunate trends confined to the Brazilian and Russian markets, sales of and demand for automotive technology are pretty much stable. For technology companies like ZF, this is a good moment to make the most of opportunities for growth, but also to get ourselves really fit for the challenges of the future.

What do these challenges look like for ZF?

We need to make some big investments – and that’s what we’re doing, using the income from today’s business to finance the development of tomorrow’s technologies. Above all, this means finding attractive, future-proof solutions for tomorrow’s mobility needs. These include things like electrifying the driveline, or developing advanced driver-assist systems for automated and eventually autonomous driving…

… although that’s only one of the challenges, isn’t that so?

Absolutely. Others include the dramatic transformation of the entire industry landscape, along with the players – development partners and prospective customers alike. New, heavyweight players are maneuvering for positions in key future technologies. People often talk about the software giants in Silicon Valley, but we’re seeing some powerful alliances in specialized areas. Here I would mention Samsung and MobilEye, with their outstanding expertise in interpreting image data.

How are customers and markets changing?

First of all, the term “customer” is becoming increasingly complex – that’s already clear. We’ll undoubtedly continue to have traditional automotive customers in the future. But we’ll also have new kinds of customers, such as mobility providers and business startups. They may only be placing modest orders now, but that will soon change. At the same time, customers in growth regions and emerging markets have very specific requirements.

But that’s not all, is it?

No, because customers are responding to the technology revolution in different ways. Some of them are building up their in-house expertise, so that – as far as possible – they can develop their own future technologies. Others are showing more interest in partnerships with external systems suppliers. We’re pursuing a simple strategy: to provide all our customer segments with exactly what they need, from components to complete systems through to turnkey solutions for autonomous driving.

What are the key prerequisites for successful engagement with growth markets?

I like to differentiate between growth markets, because high tech can be just as attractive as best cost. In the Asia-Pacific region in particular, customers are really hungry for high-tech products. If we want to exploit the growth potential of markets in the Far East, we must speed up our supply of innovations to the region.

Let’s take a look at China’s billion-dollar market. How is ZF positioned there?

In terms of introducing new – and especially all-electric – drive systems, China’s automotive market is setting an impressive pace. Here, of course, government incentives also play an important role. But in the electric mobility segment, China is a now a leading market, no longer just an emerging one. So the country offers exceptional growth prospects for automakers. However, it also has very high expectations of us suppliers!

Because the country doesn’t just offer great prospects for e-mobility…

Indeed – there’s also a huge need for various active and passive safety solutions. You just have to look at the changes in China NCAP regulations. Starting next year, they’ll be evaluating advanced pedestrian protection, emergency braking and side-impact protection in much greater depth. And vehicles without those features will find it almost impossible to get the top five-star rating in China NCAP tests. ZF is in a great starting position for doing business there in the future. By way of example, I’ll just mention our Electronic Stability Control (ESC) with brake assist, or our side-impact airbags.

How are you planning to convert these opportunities into actual business?

Whether you’re talking about China or anywhere else in the world, the solution is the same: more localization. We’ve realized that we simply must be on the spot. That’s why we’re offering more and more local engineering services, as well as research and development. This will enable us to tailor many of our products to local target market needs at high speed. At the same time, we’ll be faster to pick up new ideas from China. That’s precisely what OEMs are expecting of a partner like us – that we work closely with them to develop safety technologies for series production.

So in real-world terms, what is ZF’s localization strategy for China?

We’ve invested heavily in expanding our R&D operations there. A few months ago, we inaugurated our expanded Tech Center in Shanghai. By 2022, we should have another 600 or so engineers working there. Put that together with the nearby Tech Center for Safety Technology in Anting, and ZF’s engineering footprint in China will soon fit perfectly with our already highly localized production network.

Does this mean you’re targeting business with Chinese OEMs in particular?

It means we’re targeting growth. In view of the successes of Chinese OEMs in e-mobility and the SUV segment, they really are highly attractive customers. With our technology, we can help them achieve their ambitious plans for expansion and growth.

Peter Lake

The native of London has been a member of ZF’s Board of Management since October 2015, where he is responsible for the Corporate Market function as well as the Asia-Pacific and South America regions. Starting in 1978, he worked in various positions for previously independent supplier Lucas (later part of TRW), then in 2004, started working for TRW Automotive as Executive Vice President, Sales & Business Development as well as for ZF TRW as Executive Vice President, Sales & Business Development.

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