ZF Group (China) Business Report FY ended Dec. 2022

Financial Overview

(in EUR billions)

	FY ended Dec. 31, 2022	FY ended Dec. 31, 2021	Rate of change (%)
Sales	7.7	7.0	10

-The ZF Group achieved full-year sales of EUR 43.8 billion in the fiscal year ended December 2022, up 14.4% year-over-year (y/y). Of this, the China region accounted for EUR 7.7 billion, up 10% y/y and accounting for 17.6% of the entire Group’s sales.

ZF Guangzhou Technical Center breaks ground

-According to several media reports, ZF Group's fourth R&D center in China - ZF Guangzhou Technical Center recently officially broke ground. It is reported that the first phase of the ZF Guangzhou Technical Center project, with an investment of about RMB 700 million and an area of about 10,000 square meters, will be completed by the end of 2022 and officially put into operation in 2023. ZF Guangzhou Technical Center is the fourth R&D center of ZF in China, and also the first R&D center of ZF in South China. The center is equipped with core engineering research and development capabilities, focusing on software development, mechatronics design, system integration and other core competencies to provide local customers with ZF's comprehensive technical solutions, such as active safety systems, passive safety systems, autonomous driving, electric drive systems and other technical solutions. (From a press release dated March 23, 2022)

Establishment of new business divisions

Commercial Vehicle Solutions Division
-ZF announced the successful start of its new “Commercial Vehicle Solutions” (CVS) division with effect from January 1, 2022. The new division combines ZF’s expertise in the commercial vehicle industry and will significantly advance solutions for safe, sustainable and digitized transport. The new division unites ZF’s former Commercial Vehicle Technology and Commercial Vehicle Control Systems divisions, the latter of which was formed from ZF’s May 2020 acquisition of WABCO. This makes ZF Commercial Vehicle Solutions the largest commercial vehicle supplier, holds a leading position in the core technology fields of electromobility, digitization as well as autonomous and networked driving. ZF’s Commercial Vehicle Solutions division is supported by around 25,000 employees based across 61 locations in 28 countries. (From a press release dated January 13, 2022)

Alliances

-ZF Commercial Vehicle Technology (Jiaxing) Co., Ltd. (ZF) and Beiqi Foton Motor Co., Ltd. (Foton Motor) plan to jointly build an AMT (automated manual transmission) plant for mid-sized vehicles. The plant will be built in Nanhu District, Jiaxing City, Zhejiang Province. It will house assembly and testing lines for AMTs installed in mid-sized vehicles. The plant will be constructed in two phases. The first phase will be completed in 2024 and deliver an annual production capacity of 55,000 units. The total investment in fixed assets will be CNY 130 million, which will be jointly funded by Foton Motor and ZF. (From a press release dated February 9, 2023)

-The company has signed an investment cooperation agreement with the government of Huadu District, Guangzhou City, Guangdong Province. The company will build a new automotive electronics plant to continue to increase its production capacity of products in the fields of autonomous driving, cameras, sensors, and brake electronics products, and will dedicate itself to New Energy Vehicles and intelligent connected vehicles by building the new plant into a highly automated and intelligent global benchmark factory. The plant is scheduled to start construction in 2023 and go into production in 2025. (From a ZF official WeChat account press release dated December 13, 2022)

New products and production lines
-ZF has realized the localized production of Twin Compressors at its Qingdao plant in China. Since the localized production line has been put into operation, ZF is able to shorten manufacturing lead times of air suspension compressors, reduce costs, as well as improve delivery capacity and customer experience. ZF is ramping up production of Twin Compressors at the moment, with its first production line starting operation in November 2022. In 2023, ZF will continue to increase the production capacity of Twin Compressors by renovating the existing production lines. According to the market trends and business scale, ZF plans to add new production lines for air compressors at the Qingdao plant to meet growing customer needs from China and abroad. (From a press release dated December 27, 2022)

-ZF Friedrichshafen AG (ZF) announced that it has developed a highly scalable and modular inverter architecture that allows OEMs maximum flexibility in both 400V and 800V voltage classes. The modular inverter platform is not dependent on predefined semiconductors and is designed to support vehicle manufacturers in bridging the Silicon-to-Silicon Carbide transition while also being prepared for future semiconductor trends. These inverter innovations are already being readied for next-generation e-drives that will be ready for production by 2025. The control board within an inverter is the home of the inverter software. It is one of the key components of an inverter, because the gate drive technology is responsible for safety features, performance, efficiency and total range of the EV that can be squeezed out of the power semiconductors. The new inverter generation brings these hardware and software optimization functionalities to customers to realize faster power semiconductor switching times, better short circuit protection and much more. ZF has built up significant knowledge in this area both independently and with strong partners such as WOLFSPEED. (From a press release dated January 4, 2022)

-ZF Friedrichshafen AG (ZF) announced that is providing the foundation for autonomous driving through its sensor suite that includes its world-leading light vehicle forward-facing camera business featuring the S-Cam4.8, among the very first mass-produced single-lens 100-degree field of view camera that is now being introduced across a range of customers. ZF is introducing its next-generation radar portfolio that includes Mid-range radar and Full-Range Radar options, offering this key sensor in highly effective and affordable options and radars with enhanced sensing range and resolution. ZF’s Next Generation radar family includes options with advanced 3-D antennas as well as systems with remote radar heads that feed data into a central processor for 360- degree sensing at affordable costs. ZF’s sensor suite also includes LiDAR options to provide a third sensor for sensing the environment in more detail offering redundancy to the camera and radar. Working with its partner Ibeo, it will assist in the introduction of the solid-state IbeoNEXT LiDAR beginning in 2022 and have future LiDAR generations under development that balances excellent performance at a reasonable cost. (From a press release dated January 4, 2022)

Domestic Investments

-ZF announced the groundbreaking of its chassis component systems and active kinematics control (AKC) project at its Zhangjiagang base. ZF plans to invest around USD 100 million to expand the existing product range and production capacity of chassis components at the Zhangjiagang location. The expansion project is expected to start official production in 2024 and will generate annual sales of around CNY 2 billion in 2027. Upon completion, the chassis component plant will produce control arms, steering knuckles, steering tie rods and stabilizer links, covering almost all products in the product line of chassis components. (From a ZF official WeChat account press release dated November 21, 2022)

-ZF's first 800V electric drive axle rolled off the production line in Xiaoshan District, Hangzhou. The local team of ZF’s Electrified Powertrain Technology division in Shanghai led the development process. ZF invested about USD 300 million in its Hangzhou manufacturing site. The first phase of the site, including three lines for processing and assembly, is already in operation. It has an annual capacity of 400,000 sets of axle drive systems and reducer gear sets. The second phase of the Hangzhou site, which launched production recently, will be responsible for production of 800V electric drive axle assemblies. The second-phase project includes a production line for the stators and rotors of synchronous motors with hairpin windings, an assembly line for highly integrated electric drive axles, and fully-automated offline testing equipment. It will become an exemplary Industry 4.0 plant with an annual capacity of 200,000 sets of 800V electric drive axle assemblies. (From a press release dated September 2, 2022)

-ZF Asia Pacific Group Co., Ltd. signed an agreement with the Management Committee of Zhangjiagang Economic and Technological Development Zone. Under the agreement, ZF plans to invest USD 100 million to expand the production capacity at its Zhangjiagang base. The project is planned to break ground in 2022 and start operation in 2024. It is expected to generate around CNY 2 billion of annual sales in 2027. Founded in March 2014, ZF Automotive Technologies (Zhangjiagang) Co., Ltd. has become ZF's biggest manufacturing base in the Asia-Pacific region. Involving a total investment of CNY 1.8 billion and covering an area of 184,000 square meters, the base owns four factories which focus on the production of braking systems, passive safety systems, electric steering systems, and chassis components, respectively. (From a press release dated August 18, 2022)

-ZF Automotive Technologies (Shanghai) Co., Ltd., signed a new investment agreement with Shanghai Anting Economic Development Center to expand its product categories and production capacity of electronic power steering (EPS) systems in China. The first phase of the project, with a total investment of CNY 320 million, is to add about 4,000 square meters of construction area to ZF’s current Anting plant in Shanghai. This area will increase production of EPS products. The expanded facility is scheduled to start production in mid-2023. By 2024, the added EPS sales are expected to increase by more than CNY 1 billion compared with the sales in 2022. (From a press release dated August 3, 2022)

-ZF plans to build a plant in the coastal city of Rizhao, Shandong Province. With a total investment of EUR 60 million, the plant is expected to go operational by the end of 2022. In three years, the plant's annual sales are expected to exceed CNY 1 billion. Covering 14,000 square meters, the plant will engage in development, production and sales of airbags and other products. Its products will mainly meet Chinese domestic market demand with potential export markets including Thailand, South Korea, the United States, Japan and Vietnam. (From a press release dated July 9, 2022)