Vehicle sales may be falling in China, but that doesn’t mean there can’t be growth.
For leading global suppliers like Continental and ZF, who have invested big money into autonomous driving and electrification technologies, they are banking on China to provide the necessary growth in content of those technologies despite the overall market slowdown.
This week’s feature stories on these two German technology companies (calling them tier-1 suppliers is a thing of the past) reflect that narrative.
Continental CEO Dr. Elmar Degenhart again got quite a few questions from the Chinese media during the live online broadcast of his company’s annual press conference on March 7. But he was firm that Continental would continue to increase its sales revenues in China independent of the growth of the overall market because the increase in equipment and safety systems for each car such as stability and driver assistance systems are driving up content.
Continental will not be the only one benefiting from this. Competitors such as ZF, Bosch, Valeo and others are expected to reap the benefits from increased content in advanced driver assistance systems (ADAS) and related components in not only premium vehicles but also mass market vehicles especially from the Chinese brands that are racing to introduce Level 2 ADAS as standard features on their vehicles this year.
For ZF, who has operated in China for nearly 40 years, the year 2019 marks the start of what Dr. Holger Klein, newly appointed board member in charge of Asia Pacific and India based in Shanghai (first time ZF is having a board member based in China), calls an era “Led by China.” That entails not only localized management (such as him), localized production but also localized development for global applications. And like Continental, ZF is bullish about the prospects of Chinese domestic automakers who are at the front of the pack, and even expects them to account for about a quarter of its global passenger car sales revenues by 2023 as content rises. When these Chinese players go global, Continental and ZF have every role to play to support their global expansion efforts when they start production outside of China, such as Geely’s LYNK & CO brand, which is planning to start production at Volvo’s Belgian plant later this year.
ZF is also speeding up localization efforts of its 8-speed automatic transmission, chassis components and electric drive components to cater to the needs of Chinese OEMs as emissions and fuel efficiency requirements get more demanding. Likewise, local R&D personnel are to be increased by two-thirds from the current 1,500 to 2,500.
The role and growth of China cannot be underestimated for multinational suppliers, not only will they have to localize with their traditional western customers, but the determination and drive of Chinese OEMs to catching up and leading the western OEMs is also a golden opportunity that cannot be missed. Both Dr. Degenhart and ZF CEO Wolf-Henning Scheider, as well as quite a few other global CEOs of global suppliers will be at the upcoming Shanghai Auto Show. Their ‘In China, for the world” motto will be on fully display.