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5. ZF Friedrichshafen AG Business Report FY ended Dec. 2017

ZF Friedrichshafen AG Business Report FY ended Dec. 2017

Factors
1) Net Sales
-The Company’s sales for the fiscal year ended December 31, 2017 increased by 3.6% over the previous year to EUR 36,444 million. The Company had an organic growth rate of 6% after accounting for changes in scope and foreign currency exchange effects. Sales increased across all of the Company’s operating regions except for Africa.

2) Operating Profit
-In the fiscal year ended December 31, 2017, the Company had an operating profit of EUR 1,723 million, an increase of 6.8% over the previous year. The increase in operating profit and margin over the previous year was primarily due to an increase in overall productivity.

3) Car Powertrain Technology
-Sales in the Car Powertrain Technology Division for the fiscal year ended December 31, 2017 increased by 9.3% over the previous year to EUR 8,725 million. The primary reason for the increase in sales was continual high demand for automatic transmissions in passenger cars.

4) Car Chassis Technology
-The Car Chassis Technology Division had sales of EUR 6,484 million in the fiscal year ended December 31, 2017, an increase of 0.6% over the previous year. Sales increased due to disproportionately high sales in the Asia-Pacific region, partially offset by decreased sales in North America and foreign currency exchange effects.

5) Commercial Vehicle Technology
-In the fiscal year ended December 31, 2017, the Company’s Commercial Vehicle Technology Division had sales of EUR 3,172 million, an increase of 7.2% from the previous year. Strong market growth in China, Russia and Brazil were the primary drivers of growth in the division.

6) E-Mobility
-The Company’s E-Mobility Division had sales of EUR 924 million in the fiscal year ended December 31, 2017, an increase of 7.2% over the previous year. The division had organic growth exceeding 9% during the fiscal year. The growth was primarily due to high demand for hybrid modules as well as control systems for automatic transmissions.

7) Active & Passive Safety Technology
-The Active & Passive Safety Technology Division’s sales in the fiscal year ended December 31, 2017 totaled EUR 13,970 million, an increase of 2.4% over the previous year. The division had an organic growth rate of approximately 6%. Sales increased in spite of the sale of the division’s Engineered Fasteners & Components Business Unit in July 2016 and the restructuring of the division’s aftermarket activities in 2017.

8) ZF Aftermarket
-In the fiscal year ended December 31, 2017, the Company’s newly created ZF Aftermarket Division had sales of EUR 3,007 million, an increase of 6.8% over the previous year. The division comprises of the aftermarket activities of the Active & Passive Safety Technology Division and the ZF Services Business Unit.

Acquisitions

-The Company has signed an investment and cooperation agreement with the engineering services company BeeSpeed Automatizari S.R.L., with the ultimate goal of eventually acquiring BeeSpeed’s automotive division. BeeSpeed is headquartered in Timisoara in western Romania. In the past ten years, 75 BeeSpeed developers and engineers have been working for the ZF TRW Braking Systems Business Unit. With the agreement, the Company has secured their automotive expertise for the long term. According to the agreement, the Automotive Division will spin-off from BeeSpeed by the beginning of 2018, with the legal transfer taking place on January 1, 2019. The purchase price was not disclosed. (From a press release on May 16, 2017)

-The Company has acquired approximately 45% of the shares in Astyx Communication & Sensors GmbH located in Ottobrunn, Germany. Founded in 1997, Astyx develops and produces ultrahigh-frequency radar sensors and modules. In collaboration with the Company, Astyx will develop the next generation of short and long-range radar sensors. The Company’s Active and Passive Safety Technology Division has been developing and supplying radar technology for advanced driver assistance systems (ADAS) where distance and automated speed control are crucial. (From a press release on March 30, 2017)

Restructuring

-The Company announced that it is selling its global body control systems business unit and has signed a purchase agreement with Luxshare based in Hong Kong. Luxshare intends to operate the global body control systems business as an independent company that will remain headquartered in Radolfzell, Germany. The global body control systems management team will continue to lead the business. The body control systems business has nearly 6,000 employees at 16 locations in eleven countries and 11 sales and engineering offices in five countries. It develops and manufactures automotive interface solutions such as complex switches, steering column control modules, remote keyless and passive entry access systems, tire pressure monitoring systems, and rain/light/humidity/solar load sensors. The complete transfer of business activities is expected to conclude by the end of 2017. (From a press release on August 30, 2017)

Joint Ventures

-The joint venture between Brakes India and the Company announced the successful production of the first electric park brake (EPB) system with a global OEM, marking its first launch for the Indian market. EPB is part of an ongoing commitment to help enhance overall brake system performance, driver safety and comfort. (From a press release on October 6, 2017)

-On September 13, 2017, the Company and Beijing Hainachuan Automotive Parts Co., Ltd. signed a memorandum of understanding (MOU) regarding the establishment of a joint venture that manufactures parts and components for electric vehicles in the Chinese market. (From some releases on September 15, 2017)

-The Company announced that it has formed a joint venture with three suppliers developing two-wheeler component technology and services or battery technology. The joint venture aims to develop electrified micromobility products. Electric micromobility is expected to enjoy demand expansion as a means of urban transport for people and cargo. The Company’s partners are Magura and BrakeForceOne, which produce motorcycle parts, and Unicorn Energy, a battery maker. Zukunft Ventures GmbH, established by the Company in September 2016, will make a 48% investment in the joint venture. The four companies will combine their areas of expertise to develop micromobility products with plans to present the first product in late summer of 2017. (From an article in the Nikkan Jidosha Shimbun on June 21, 2017)

-The Company is planning to form a joint venture with e.GO Mobile AG through its subsidiary Zukunft Ventures. The goals of the new joint venture e.GO Moove, will be to develop, produce and sell autonomous people and cargo movers. The first prototype was recently presented on the campus of RWTH Aachen University. The Company will make its ADAS, chassis and sensor fusion technologies available to the planned joint venture. The scalable supercomputing control box ZF ProAI will play a central role as an integrated vehicle system that can be updated in the cloud. The control box is based on artificial intelligence algorithms for vehicle-to-infrastructure applications and is capable of learning. It can communicate with other vehicles and its surrounding environment, and, in the form of swarm intelligence, make vehicle fleets safer and more efficient. The Company, e.Go Mobile AG and Nvidia are working together to develop and test autonomous driving functions for the e.GO Mover. (From a press release on May 18, 2017)

Business Partnership

-NVIDIA announced that Deutsche Post DHL Group (DPDHL) and the Company have partnered together to deploy a test fleet of autonomous delivery trucks, starting in 2018. DPDHL will outfit electric light trucks with the ZF ProAI self-driving system, based on NVIDIA DRIVE PX technology, for automating package transportation and delivery. DPDHL currently has a fleet of 3,400 StreetScooter electric delivery vehicles, which can be equipped with multiple sensors from the Company. This can enable the vehicle to use artificial intelligence to understand its environment, plan a safe path forward, proceed along a selected route and park itself, ensuring deliveries can be made with greater accuracy and safety at lower cost. (From a press release on October 10, 2017)

Recent Developments

-On December 7, the Company announced that Stefan Sommer has resigned as CEO. Konstantin Sauer, Chief Financial Officer and CEO Deputy Representative, will serve in the position in the interim until a new CEO is appointed. Sommer promoted development of next-generation automotive technology like electrification and autonomous driving, and grew the Company into a mega-supplier through means such as the acquisition of TRW Automotive Inc. Some media reported that the resignation arose from a disagreement between Sommer, who pursued a business expansion policy, and the foundation that owns the company, which aims to reduce debts and increase dividends. (From an article in the Nikkan Jidosha Shimbun on December 9, 2017)

-The Company announced that it is ahead of schedule, in that 2.5 years after the takeover of TRW Automotive in May 2015, it has largely completed the integration of the company. Reinforced by its new corporate claim of "See, Think, Act.", the Company now offers a broad portfolio of intelligent mechanical systems which can address the challenges of future trends including digitalization, electromobility and autonomous driving. Based on the theme of "Safety, efficiency and electromobility”, the Company will showcase its latest systems and solutions at the North American Commercial Vehicle Show in Atlanta, Georgia. (From a press release on September 25, 2017)

-The Company is strategically expanding its competencies to widen its portfolio of fully-integrated intelligent systems. These investments follows the Company’s corporate claim of “See, Think, Act”, for both passenger and commercial vehicles. The Company is driving the electrification of buses and other commercial vehicles to increase safety and efficiency. The Company is also expanding competencies through investments, shareholdings and cooperation for autonomous driving features. This includes the ZF ProAI control platform, developed in cooperation with Nvidia, which makes artificial intelligence available to the mobility industry. (From a press release on May 23, 2017)

-ZF Japan Co., Ltd., a Company subsidiary, announced that it has relocated its head office from Tokyo to Yokohama City, Kanagawa Prefecture. ZF Japan expects that the new location's business environment and convenience, and its concentration of automotive, electronics and information technology companies, will help secure human resources required for next-generation technologies. The new head office also serves as the headquarters of TRW Automotive Japan Co. Ltd., which was acquired by ZF Japan from U.S.-based TRW Automotive Inc. in May 2015. (From an article in the Nikkan Jidosha Shimbun on March 27, 2017)

-The Company and digital startup accelerator Plug and Play agreed on a strategic partnership. As a “Founding Anchor Partner“, the Company can further expand its network of partners to startup companies which are active in relevant technology areas. Plug and Play, located in Silicon Valley, California, is renowned worldwide for connecting startups to corporations and invests in over 100 companies every year. With the new partnership, the Company can build a closer link to young and innovative enterprises dealing with disruptive trends and opportunities related to connected mobility. The Company can also consider long-term direct investments through “Zukunft Ventures GmbH”, its venture capital company established in fall 2016. Plug and Play Germany GmbH, which previously signed a contract with ZF, is already connected with the automotive business. (From a press release on February 22, 2017)

Contracts

-The Company has brought electric park brake (EPB) technology to the larger light truck market with this first-to-market introduction of heavy duty EPB on the 2018 Ford F-150. The Company is the world’s volume leader in EPB technology with more than 100 million units on world roadways for passenger cars, light trucks, commercial vans and SUVs. (From a press release on September 26, 2017)

-The Company has launched its first column drive electric power steering (EPS) system in the U.S. market on the all-new 2017 Jeep Compass. Electric steering embodies intelligent mechanical systems to enable enhanced safety and automated driving functions, while improving fuel economy and reducing greenhouse gas emissions. Additionally, electric steering can be integrated with other systems to add functions such as lane keeping assist and lane centering, which FCA has implemented on specific models in conjunction with the Company’s camera technology. The system on the Jeep Compass is sold to FCA globally and is manufactured in Mexico, Brazil, China and Poland. (From a press release on August 8, 2017)

-The Company signed a strategic partnership agreement with SAIC MAXUS Automotive Co., Ltd. The Company will provide the latest transmission generation for passenger cars (8HP50) for state-of-the-art SAIC MAXUS models. Besides transmissions, collaborations between the two companies involve a broad range of products such as chassis components, shock absorber systems, powertrain components, belt-drive steering systems, and Electric Park Brakes (EPB). (From some releases on July 31, 2017)

-The Company’s TraXon automatic transmission system is supplied to Chinese manufacturer Foton's new Auman EST-A, a truck designed specifically for long-distance traffic. TraXon automatic transmissions are produced in Friedrichshafen and are shipped directly to the Foton production facility in Beijing. The Company also produces its new AIRTRAC air-sprung rear axle system for the Foton heavy truck. The AIRTRAC system is designed for heavy trucks, preventing damage to loads and road surfaces while improving driving comfort. The AIRTRAC system will be used for the first time by Foton, and is produced in China. (From a press release on March 27, 2017)

-In collaboration with Porsche, the Company has developed a modular hybrid transmission kit for sports vehicles to be used with its all-new 8-speed dual clutch transmission (8DT). The new sports transmission, for rear-wheel and all-wheel drive vehicles, offers rapid shift times, high levels of efficiency, and flexibility. With a new gear set design, it was possible to integrate a 100 kW hybrid module without increasing the length of the transmission, as compared to the current 7DT sports transmission. The new transmission is manufactured at the Brandenburg plant. Volume production of vehicles that will feature the 8DT has begun with the Porsche Panamera. (From a press release on February 16, 2017)

-The Company announced that it supplies Active Kinematics Control systems for the following vehicles:

• Porsche 911 Turbo―dual-actuator system
• Porsche 911 GT3―dual-actuator system
• Ferrari GTC4Lusso―dual-actuator system
• Porsche Panamera―single-large actuator system
• Audi Q7―single-large actuator system
• Cadillac CT6―single-large actuator system
• BMW 7 Series―single-large actuator system

(From a press release on February 10, 2017)

-The first Bus Rapid Transit system in Wuhan City, China began operations on December 28, 2016. The system uses 18-meter-long electric buses that are equipped with the Company’s axle systems designed for low-floor buses. These axles include the RL85A front axles, AVN132 tag axles, AV132 portal drive rear axles, which are all robust and maintenance-free. The low-floor buses offer step-free access to users, which will save time and lead to high operational efficiency. The Company is working on modularization and weight reduction to help automakers produce lighter vehicles with less maintenance requirements. (From news releases issued by multiple sources on January 12, 2017)

Awards

-The Company received a 2017 Nissan Global Supplier Award for Innovation for its efforts in the development of camera technology. The Company’s S-Cam 3.5 state-of-the-art camera is an integral part of Nissan’s ProPILOT technology on the Serena minivan. Employing advanced image-processing technology supported by ZF camera technology, the ProPILOT system understands road and traffic situations and utilizes the information for its steering maneuvers. This is the Company’s second award in the past three years from Nissan recognizing its leading camera technology. (From a press release on September 5, 2017)

Outlook

-The Company expects that its sales for the fiscal year ending December 31, 2018 will be approximately EUR 36.5 billion.

-The Company aims to invest more than 6% of its sales in research and development annually.

-In the fiscal year ending December 31, 2018, the Company’s expects that its research and development expenditures will increase compared to the 2017 fiscal year.

R&D Structure

-As of December 31, 2017, the Company has 16,250 employees working in research and development worldwide.

R&D Facilities

-The Company has 20 main development facilities at the following locations:

• Germany: Friedrichshafen, Alfdorf, Auerbach, Dielingen, Duesseldorf, Koblenz, Passau, Radolfzell, Schweinfurt
• Czech Republic: Pilsen
• Poland: Czestochowa
• UK: Soliull
• China: Shanghai, Anting
• U.S. (Michigan): Northville, Livonia, Farmington Hills, Washington
• India: Hyderabad
• Japan: Yokohama

-The Company announced that it is preparing for further growth in the Chinese market with the expansion of its engineering center in Shanghai. The Company is investing EUR 50 million to update and expand its existing facilities in the Songjiang district to 54,000 square meters. The Company plans to further expand over the next five years and more than double its workforce to approximately 1,000 employees by 2022 through hiring 600 additional engineers. Engineers will be able to utilize state-of-the-art equipment in several laboratories for the development of driveline and chassis systems technologies for many types of vehicles. The Songjiang facility works closely with the Company’s other technology center located in Anting, which focuses on active and passive safety technology for the Asian market. (From a press release on April 18, 2017)

-The Company inaugurated its first technology center in India at Hyderabad. The center will initially employ 1,000 engineers, which will further increase to 2,500 by 2020. The engineers at this center will primarily focus on developing innovative electronics and software solutions. The Company announced an additional EUR 15 million investment in the location over the next five years. (From a press release on March 2, 2017)

R&D Activities

-On December 1, 2017, 20 developers from the IEE Sensing Germany, based in Upper Bavaria, will join and work for the Company’s subsidiary Zukunft Ventures under the name Zukunft Mobility. The automotive engineering company specializes in software development for autonomous driving functions. The 20 employees will be working on developing autonomous functions, particularly in the sensor and software development sectors, and simulation and test procedures. (From a press release on November 24, 2017)

-The Company announced that it has participated in the EU project BEHICLE, which developed a three-seat electric vehicle with the same name, as a system partner for occupant safety. The Company developed an innovative four-point seat belt system and airbag systems for the vehicle. As the first in its category, BEHICLE is designed to receive five stars according to Euro NCAP’s testing standards. (From a press release on September 18, 2017)

-In the fiscal year ending on March 31, 2017, ZF Steering Gears, a Company subsidiary, invested INR 45.3 million for research and development. Its activities included developing new test rigs for functional testing. It also developed double-barrel power steering gears, valve blocks and radial piston pumps. ZF Steering Gears also established a new piston sub assembly automation line and ball track imported grinding machines to enhance quality.

-The Company announced that its Vision Zero Vehicle is helping to set the course for an accident-free and zero local emissions future. The vehicle features a 150 kW electric axle drive system for dynamic acceleration. The entire propulsion system including the integrated power electronics is housed in an innovative, space-saving modular rear axle system called mSTARS (modular Semi-Trailing Arm Rear Suspension). mSTARS makes it easier to electrify volume production vehicle platforms and is the Company’s response to industry megatrends. The new rear axle system plays a role in zero-emission driving and in improved safety and thus brings the Company a step closer to its Vision Zero of supporting an accident- and local emission-free future. (From a press release on June 21, 2017)

Technological Alliance

-The Company announced that it has agreed on a strategic cooperation with Italian company ZAPI. The goal of the cooperation is to offer customers in commercial vehicle and industrial technology faster and more tailored complete electric or hybrid drive systems for trucks, buses, construction and agricultural machines. In the alliance, the Company and ZAPI contribute their specific expertise and accelerate change for new drivetrain technologies. The Company is contributing its expertise in system design and mechanical components such as transmissions, axles and steering systems. The Company’s existing product portfolio for electric drives in volume segments is supplemented by ZAPI with electric components such as electric motors, inverters, inverters for alternating current motors and DC voltage converters for applications in smaller quantities. (From a press release on November 12, 2017)

-The Company and its partner Faurecia are unveiling the initial results of their collaboration and their future plans months after signing an agreement in May 2017. By introducing their new seat concept at both Faurecia’s and the Company’s booths during IAA 2017, both companies are shaping the trend toward a more versatile, comfortable, and safer passenger car interior. The goal of the cooperation between ZF and Faurecia is “Cockpit 2025” which will help support the transition from assisted and automated driving to fully autonomous driving. (From a press release on September 19, 2017)

-The Company and Chinese Internet company Baidu have announced a new strategic cooperation. The two partners intend to collaborate in the areas of autonomous driving, telematics and mobility services to develop extensive technical solutions for autonomous driving in China. The Company and Baidu intend to bring their specific expertise to the alliance and promote knowledge sharing of technologies to develop autonomous driving and telematics in China. New business models for the Chinese market are expected to emerge based on the established market position of both companies. (From a press release on September 12, 2017)

-The Company has entered into another pioneering strategic research partnership to coincide with the opening of its Innovation Hub in Silicon Valley. With researchers from the renowned University of California, Berkeley, the Company will harness self-learning machines crucial to fully autonomous driving. (From a press release on August 31, 2017)

-Nvidia announced that it has formed a strategic partnership with the Company and Hella to cooperate in the development of AI for use in production self-driving vehicles. Nvidia will supply its Drive PX platform for developing self-driving vehicle-use AI. The Drive PX platform will enable the Company and Hella to jointly develop software for driver assistance systems that integrate their imaging and radar sensor technologies for autonomous driving functionality. The partnership aims to develop AI for passenger cars, while also addressing commercial vehicle and off-highway applications. Drive PX enables the development of software that offers New Car Assessment Program-compatible safety and self-driving capabilities on a single platform. (From an article in the Nikkan Jidosha Shimbun on June 30, 2017)

-The Company and Hella entered into a strategic partnership for sensor technology, particularly for front camera systems, imaging and radar systems. The first joint development project in camera technology will start immediately, with a goal of market launch in 2020. The Company will contribute hardware and its expertise in functions, systems and integration, whereas Hella and its subsidiary Hella Aglaia Mobile Vision will contribute competence in imaging software and application development. In the mid to long term, the partnership will provide camera systems for automated driving functions in commercial vehicles and off-highway applications. For radar systems sector, the partners will identify opportunities to provide attractive volume-production solutions in the short to mid-term by jointly building up its product portfolio. HELLA’s 360° surround view radar systems together with the Company’s mid-range and long-range radar systems will establish a new and comprehensive systems solution. (From a press release on June 20, 2017)

-The Company announced that it has signed a strategic partnership agreement for the development of autonomous driving technologies with Faurecia. The two companies will cooperate in the development of integrated safety systems for autonomous vehicles, and advanced safety technologies for cockpits of the future. Through cooperation with Faurecia, which has strength in automotive interior parts, the Company is aiming to develop flexible and comfortable interiors that are equipped with high level safety technology. The two companies will develop seats that integrate many safety devices, recline and rotate, and efficiently switch from automatic to manual mode operation. They will also develop network connectivity and other functions that are required for the next-generation vehicle interiors. The partnership is for know-how exchange and cooperative work, and will not involve a capital tie-up. The Company and Faurecia can work on projects individually depending on customers' requests. (From an article in the Nikkan Jidosha Shimbun on May 9, 2017)

-The Company collaborated with UBS and innogy Innovation Hub to develop the Car eWallet, which offers several convenient payment features and functions. The new Car eWallet is built on blockchain technology to ensure security, and is an innovative payment system that makes it easy to pay for electric car charging while on the go. The partners are planning to field-test the Car eWallet in 2017. The Car eWallet will allow users pay on-the-go for highway tolls, parking fees and electric charging, and can collect fees for car-sharing, energy provisioning to the power system or delivery services. With the new solution, every user will have rapid and simple access to the charging infrastructure registered on the blockchain. Blockchain refers to a virtual, cryptographically secure chain of data blocks which store records of all transactions, so that a list of all user account balances can be generated. Because this list is stored on many computers and can be checked on by all users, the system is considered very secure. (From a press release on January 5, 2017)

-The Company announced at the CES 2017 in Las Vegas that it is working with Nvidia to develop AI systems for the transportation industry, including automated and autonomous driving systems for passenger cars, commercial trucks, and industrial applications. The ZF ProAI for highway automated driving is the Company’s first system developed using Nvidia AI technology. ZF ProAI will use the scalable Nvidia Drive PX 2 AI computing platform to process inputs from multiple cameras, plus lidar, radar and ultrasonic sensors. The Nvidia Drive PX 2 AI platform provides the enormous computing power necessary to comprehend a 360-degree view around a vehicle and plan appropriate action. ZF ProAI will have the capability to understand the vehicle’s surroundings in real time, precisely locate itself on an HD map and plan a safe path. It is also configured for V2X applications, so it can communicate with other vehicles and surrounding infrastructure. The Company is delivering ZF ProAI as an in-vehicle system capable of over-the-air updates to add new features and capabilities throughout the life of the vehicle. Series production is planned for 2018 onwards. (From a press release on January 4, 2017)

Product Development

Intelligent Dynamic Driving Chassis
-The Company announced that its Intelligent Dynamic Driving Chassis (IDDC) offers a versatile platform for autonomous electric vehicles through environmental sensors, intelligent control units and connected mechanical systems. With IDDC, a "Skateboard" forms the basis of the Rinspeed Snap urban mobility concept. A core element of the IDDC is the mSTARS modular rear axle system (modular Semi-Trailing Arm Rear Suspension). Through Active Kinematics Control (AKC), the rear axle has a maximum steering angle of 14 degrees. The EasyTurn concept enables a steering angle of up to 75 degrees for the front axle. The Company provided a sensor cluster configured for autonomous driving in cities comprised of radar systems, lidar technology developed jointly with Ibeo Automotive Systems, and camera systems. In the future, data from systems and sensors will be analyzed and processed together on a central supercomputer called ZF ProAI, developed with NVIDIA. (From a press release on December 20, 2017)

Autonomous steering wheel concept
-The Company unveiled a new steering wheel concept aimed at supporting Level 3 and above autonomous driving functionality. The system incorporates gesture control via graphic displays to improve communication between driver and vehicle, and advanced hands-on detection technology. Engineers also designed a new airbag concept which can deploy from the back side of the wheel through the rim and covers the display, protecting the driver during a crash. (From a press release on December 13, 2017)

Products for buses and coaches shown at Busworld 2017
-The Company announced that it is presenting its innovative products for the bus and coach sector at the Busworld 2017 trade fair in Kortrijk, Belgium. Products focus on E-Mobility solutions including the CeTrax central electric drive, which powers a new bus prototype. The high-power AVE 130 electric portal axle and TraXon Hybrid will be also presented. The Company will also present its ZF-EcoLife 6-speed automatic transmission, featuring a stop/start function that significantly reduces fuel consumption in city traffic. The ZF-EcoLife Coach transmission, specifically designed for use in intercity buses and coaches, will also be showcased. (From a press release on October 20, 2017)

Seat-integrated center airbag
-The Company announced that it has developed an advanced seat-integrated center airbag. When deployed, the airbags reduce lateral head movement and shock to occupants in far-side crashes. The Company entered in a strategic partnership for the development of seats and other safety technologies with Faurecia S.A. This is the first safety technology developed after signing the agreement. According to the Company, Euro NCAP is considering future testing protocols in the 2020s where far side impact protection will become increasingly important in side crashworthiness ratings. (From an article in the Nikkan Jidosha Shimbun on June 14, 2017)

Products for electrification of commercial vehicles
-The Company offers a broad product and services portfolio for the electrification of commercial vehicles.

• CeTrax: All-electric central drive for large delivery trucks and city buses. CeTrax can be combined with single rear drive axles and conventional low-floor axles means it can be installed in low-entry and low-floor buses.
• AVE 130 electric portal axle: Solution for low-floor city buses which provides weight benefits and accommodates flexible vehicle architectures with open interior designs. It has already been established in serial application.
• TraXon Hybrid: Electric motor installed between the combustion engine and the transmission for heavy commercial vehicles.
• Central axle drive for minibuses: A solution which begins volume production for passenger cars in 2018. It combines an electric motor with a two-stage single-speed transmission, differential and power electronics to form a highly integrated, extremely compact unit. The system's 150 kW maximum performance is also sufficient for use in minibuses as well.

(From a press release on May 23, 2017)

EcoLife 6-speed automatic transmission with engine stop/start
-The Company announced the ZF-EcoLife 6-speed automatic transmission with engine stop/start function. EcoLife provides significant fuel savings in urban use and is being tested in two Citea LLE buses from the Dutch manufacturer VDL. The stop/start function automatically shuts off the engine when the bus comes to a standstill, reducing fuel consumption zero. As the driver releases the brake pedal and depresses the accelerator pedal, the engine and the transmission system are ready for an immediate start. The function is available for engines with maximum torques of up to 1,600 Newton meters, which are required in city buses. (From a press release on May 23, 2017)

Products shown at SIAT 2017
-The Company’s India operations will display its technologically advanced products including mSTARS axle system, EcoTronic commercial vehicle Automatic Manual Transmission & Aluminum control arms in SIAT 2017. In India, the Company has a strong local mechanical engineering team that supports product development and application engineering for both the automotive and non-automotive customers. (From a press release on January 12, 2017)

Company products on Rinspeed Oasis concept
-The Rinspeed Oasis was introduced to trade show visitors during NAIAS 2017. Oasis is built on the Company’s Intelligent Rolling Chassis (IRC) powered by an axle-integrated electric drive and features an innovative chassis and a redesigned steering system. The Company has equipped the Oasis with human-machine interfaces functions. The Company’s single-spoke steering wheel concept with integrated Hands ON/OFF Detection makes it possible to activate freely definable functions by touching or swiping the steering wheel rim, instead of pressing buttons or turning knobs. The steering wheel also folds down and snaps into place when in automated driving mode. The Company “Relax mode” seatbelt function was designed for the Rinspeed Oasis. In automated driving mode, the buckle and anchor plate actively lift up to give the occupants considerably more freedom to move around while remaining optimally protected. (From a press release on January 10, 2017)

Intelligent Rolling Chassis
-The Company presented its Intelligent Rolling Chassis (IRC), a ready-to-launch platform concept for urban electric vehicles at the 2017 North American International Auto Show (NAIAS). The platform combines an axle-integrated electric drive, an extremely agile chassis with an advanced steering system and an electronic control unit that coordinates all chassis functions. At the same time, the completely flat floor between the front and rear axle accommodates almost any vehicle body design. This makes the IRC an ideal and highly flexible platform for developing innovative electric vehicles for either city passenger or goods transport. (From a press release on January 6, 2017)

Patents

-In 2017, the Company filed 2,161 patents, which included 1,455 first filings.

-In the fiscal year ended December 31, 2017, 66.2% of the Company’s capital expenditure was invested on advance payments and construction in progress. 15.1% was invested towards technical equipment, machines, factory, office and other equipment. 3.6% was invested on land and buildings. The Company’s capital expenditure was used primarily for capacity expansion of existing products and the ramp-up of new products.

-Geographically, the Company’s capital expenditure in the fiscal year ended December 31, 2017 focused on Germany, the U.S., China and Mexico.

-In the fiscal year ending December 31, 2018, the Company expects that approximately 4% of the Company’s sales, or EUR 1,460 million, will be invested in capital expenditures.

Investments outside Germany

-On September 2, 2017, Foton-ZF held a groundbreaking ceremony for its high-end automatic transmission project in Jiaxing, Zhejiang. The total invested in the project is CNY 5 billion. The new facilities will be built on a 253,000-square-meter site and will produce high-end intelligent transmissions for light-duty and heavy-duty commercial vehicles. Foton Motor Co., Ltd. and the Company established Foton-ZF Light Automation Transmission (Jiaxing) Co., Ltd. and ZF-Foton Automation Transmission (Jiaxing) Co., Ltd. to produce transmissions for light-duty and heavy-duty commercial vehicles, respectively. Production of light-duty vehicle transmissions is planned to begin on January 1, 2019, with an annual production capacity of 160,000 units. The second phase of construction will expand production capacity per annum to 320,000 units by 2020. Production of heavy-duty vehicle transmissions is planned to begin on January 1, 2019, with an annual capacity of 115,000 transmissions and 20,000 retarders. The second phase of construction will expand capacity per annum to 190,000 transmissions and 40,000 retarders by 2022. (From some releases on September 4, 2017)


-ZF Steering Gears India, a Company subsidiary, acquired an industrial plot on lease at Pithampur, District Dhar, Madhya Pradesh with a view to establish a second manufacturing unit for automotive components. The planning work is in progress and the plant is expected to be operational in next 18-24 months.