German tier 1 major ZF has been a key supplier for commercial vehicle in India. But when it comes to the aftermarket passenger vehicle segment while it is a well-established name globally, in India it still has huge room for growth.
In fact, with a record sales of 38.9 lakh units in FY2022-23, the passenger vehicle segment in India has already crossed its previous peak and shows no sign of slowing down. Thanks to a slew of new product launches, improved consumer sentiments and demand for personal mobility the PV segment is one of the most lucrative segments for India Auto Inc.
For ZF’s top management too, while India is still not the top market in the region, it expects the country to be a key growth contributor, and is in a similar growth phase as China a few years ago.
ZF established its presence in India over six decades ago, and currently operates through its 14 entities including 3 joint venture partners, 18 manufacturing locations, 10 engineering centres and employs over 15,000 people.
“In the past, the Indian passenger vehicle segment was dominated by really domestic models, and hence ZF had a small presence and that’s why we were lagging behind. But now there is a change in the vehicle parc as newer models are increasing their market share. And that presents an opportunity for ZF to really drive the business, which is growing significantly every year,” says Markus Wittig, Senior VP – ZF Aftermarket; Business Line, Passenger Car, ZF Group.
Andre Scholle – VP, Head of India, MEA, CIS ZF Aftermarket adds, “We really have room to grow our business because in the past we didn’t really have a high share in OE. Of course now with the new models introduced, that gives us the opportunity to really drive our business via our distributors and workshops on that.”
In fiscal 2022, ZF reported sales of 43.8 billion euros (Rs 384,914 crore) in revenue of which 3,178 million euros (Rs 27,928 crore), or around 7 percent came from the aftermarket division.
But there is huge room for growth, especially for markets like India, which are yet to see the full magnitude of ZF’s aftermarket offering.
“First of all, we rely on the product portfolio of course that we also have globally. So we want to bring that to the Indian aftermarket. In addition to that we are also planning and introducing new products that are suitable for India. If you look at the car range that we have here, which is globally quite unique, you need to have a fitting offer that fits to yeah that extends throughout the whole product range that we have. From chassis, shock absorbers, braking, and the whole product line that we have in our portfolio,” says Wittig.
According to Markus, the evolution of the Indian passenger vehicle market, especially carmakers bringing their global models to India, the potential synergies, and the demand for genuine parts provide a huge room for growth for OE suppliers like ZF.
Entry-level car market is still not dead
Amongst the various trends seen in the passenger vehicle market globally as well as in India, is that the SUV segment is fast growing, and comparatively the demand for sedans and entry-level hatchbacks is going down. But is the segment dead?
“I don’t think that the products (entry level/hatchback) are dead, because for India and also for the rest of the region that I’m responsible for, these products will still continue to run for decades at least. I think that the business opportunity for the aftermarket is quite tremendous,” says Scholle.
For the unversed, a huge portion of ZF’s global business comes from the CV segment, and as part of its renewed focus strategy, it is looking to make similar strides in the passenger vehicle aftermarket segment.
The company believes that the advantage that it brings to the market is that it is not relying on just one product or a few products. It is bringing a gamut of solutions such as – shock absorbers, braking, and steering among others.
“In addition to a strong focus on a product that is the starting point, where we are also investing to expand our business in India is distribution, and workshops, which are key focus areas. Our teams are leveraging the strong global brands we have to create brand awareness,” says Scholle.
Setting up multi-brand workshops
ZF is aware of the competition from both organised as well as unorganised sector. And it also aims to soon start its own network of authorised multi-brand workshops.
“We have about 15,000 workshops globally, mainly in Europe, where our heritage comes from. Cars today are getting more complex and modern. If you are first-time car buyer you want to put your car into a reliable workshop. I think that the significance also in the Indian landscape changing and the workshop concept is picking up. However, to begin with we need to first catch up on the product range and have good coverage, and the right distribution then as the second step, you no doubt also need to workshop the concept. Lastly, then we also will bring the training into the workshops to qualify the mechanics that are able to repair the cars which are equipped with electronic components,” shares Scholle.
When queried about the plans, the company spokespersons were quick to respond, “The Indian market in the last couple of years is very dynamic and it will not keep waiting for us. We need to move quickly in this direction. So we are not talking about decades that we will take in order to complete our product range we’re talking about months and probably one or two years and then we have to have a substantial portfolio that will make it interesting for our partners to deal with us.
India a strategic important country
It is no secret that the Indian automotive industry is one of the fastest-growing markets globally, and continues to have a huge potential given the low penetration of vehicles per capita.
This together with the push from the regulatory side and the growing need for local sourcing is bringing new investments from automotive component companies. Then there is the ongoing geo-political situation, which is making India an ideal alternative on the back of its low-cost and high-value manufacturing capabilities.
“From a regional perspective, India, the Middle East, and Africa today. If you look at, if you look at the share that the Indian aftermarket business has within my region, it’s not ranking #1. There are other individual markets that are higher for us in terms of volume than India and this will completely change in the next couple of years. India will drive the complete region is why we also put India at first in the name of the region. The global expectation too is that India will become the next China,” concludes Scholle.
