ZF expects India sourcing to grow 10-15% annually over next 3-4 years

ZF’s sourcing from India has grown by around 20 per cent over the past three years. Moser said buying materials and components from Indian suppliers offers a cost advantage of around 20 per cent, even after accounting for shipping expenses. The company sources everything from steel and metal castings to fully machined components and complete units for its overseas operations.

“Year by year, we will have a growth rate of 10–15 per cent when it comes to sourcing,” Moser said, responding to a question about the outlook for sourcing from India over the next three to four years.

Moser put ZF’s current annual sourcing from India at around €600 million for its commercial vehicle business, €500–600 million for its passenger vehicle business, and €150 million for industrial technology. These figures represent the annual value of materials and components sourced from India for ZF’s overseas businesses.

ZF wants India to play a larger role in its global operations rather than remain primarily a source of relatively inexpensive materials, manufacturing, and engineering services. Moser said the company’s Indian teams should increasingly determine the technologies and products needed by local customers, with the global organisation supporting their development.

“For the time being, our business in India is on a ZF level; it’s around €1.2 billion, we have 20,000 people here, we have 17 production locations here, and we have thousands of engineers here,” he said.

The company is also developing products specifically for Indian customers instead of simply adapting existing European products. Moser said products designed for European markets can be too expensive for Indian buyers, making it necessary to develop alternatives tailored to local requirements.

He cited the example of a transfer case, a component used in certain four-wheel-drive vehicles to distribute power between the front and rear wheels. A product developed to meet European requirements costs around €3,000, while the acceptable price point in India is roughly €1,500.

“You can’t manage to bring the cost of an existing product down. You have to develop a new product based on the technical requirements of the local market, develop it here, and source it here,” Moser said.

ZF is working on products, including transmissions for agricultural machinery and axles and transmissions for construction equipment. Its industrial technology business in India generates €300–400 million in annual revenue, excluding wind power, and is expected to grow by 5–10 per cent annually over the next few years, Moser said.

India also plays a major role in ZF’s global wind power business, which generates around €1 billion in annual revenue. Moser said the company’s Coimbatore plant accounts for around 60 per cent of its global production of wind turbine transmissions, which transfer power from a turbine’s rotor to its generator.

The plant had a production capacity of 12 gigawatt (Gw), with a further investment planned to raise it to 14 Gw, he said. Around 75 per cent of its output is supplied to international markets.

ZF expects its global wind power business to grow by 6–7 per cent annually in revenue terms. Moser said the industry could not sustain the annual growth rates of 10–20 per cent once anticipated, as developing and commissioning new wind farms takes time.

Alongside its growth plans, ZF is facing rising costs and shortages of electronic components. Moser said growing demand from artificial intelligence (AI) data centres, which house computers used to develop and run AI systems, was intensifying competition for electronics.

“The printed circuit boards (PCBs), for example, the prices go up from today to tomorrow by 30 per cent. And this is caused by the data AI centres, which are sourcing and paying every price for electronics, for PCBs,” he said.

PCBs connect electronic components inside devices, including systems used to control modern vehicles. ZF is also facing shortages of semiconductor chips, which process information and control electronic functions.

Passing on higher costs to customers is difficult because some contracts were negotiated three to five years ago. Moser said the company was looking for alternative suppliers and materials while negotiating price increases with customers.

Longer shipping times are another constraint. Moser said sea freight transit time from India to Europe had risen from around six weeks to eight weeks since the conflict began. Longer transit times tie up working capital in goods in transit and make it harder for manufacturers to respond quickly to changes in demand.

ZF therefore continues to source from multiple countries rather than depend entirely on one market, even as it increases purchases from India.