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New ZF Commercial plant in Oragadam will be a key growth-driver, says company

New ZF Commercial plant in Oragadam will be a key growth-driver, says company

German automotive systems manufacturer ZF Group, also the parent company of listed entity ZF Commercial Vehicle Control Systems, will drive its growth engine in India from a newly inaugurated plant in Oragadam, near Chennai.

Spread across 44 acres, the facility will be used to manufacture safety, automated, connected and EV systems for commercial and passenger vehicles. Phase one of the plant, which covers an area of 7,200 sq ft, has also been earmarked for export growth, even as it doubles up as a “frugal engineering” base. Its next phase of expansion has been provisionally scheduled for 2025.

“Our growth will have to be supported by our new plants as our existing ones in Mahindra World City and Ambattur are full,” said ZF Commercial’s managing director, P Kaniappan in an exclusive chat with CNBC-TV18, alongside ZF Group India President, Akash Passey. “So, our new plant in Oragadam will be our key growth driver,” he added.

The ZF Group has announced an investment of ₹1,800 crore over a 10-year-long investment window, towards establishing its latest plant. Kaniappan said that nearly ₹200 crore of this investment would be made by the end of this year, “We have already invested ₹175 crore in land, building and equipment at the plant; we will invest ₹30 crore more and begin production by the end of this year.”

While ZF has not spelt out capacity at its latest plant, nor released an exact employment target, Passey said the group would look to create “a few thousand jobs” over the next ten years, 80% of which would go to women. “It’s good to see a plant where women outnumber men, for a change,” he added.

Both Kaniappan and Passey emphasized the focus on EV plat forms at the group’s new plant, especially with India’s shift to EVs. Significantly, despite commercial vehicles accounting for a massive chunk of ZF Group’s business in India — it is also the world’s largest CV supplier — the plant in question will cater to both, passenger and commercial vehicles.

In fact, Passey even hinted at a greater focus on the passenger vehicle segment, in India. “The birth of new EV platforms is an excellent opportunity for us,” he added, “The ZF Group will look to localise technology from our 160 plants worldwide, in India.” What will continue to be a challenge for the group, however, is the ongoing Red Sea crisis that is impacting global supply chains.

For several weeks, piracy by Houthi rebels in the Red Sea has impacted trading routes, forcing several merchant vessels to take longer sailing routes around the Cape Of Good Hope, thereby increasing costs and elongating lead times.

“It (Red Sea crisis) is definitely impacting our exports as a number of routes to Europe pass through the Red Sea,” said Peter Laier, a member of the ZF Group Board of Management, in an earlier interaction. “Our lead times have gone up by nearly two weeks.” However, Passey confirmed that ZF Commercial hasn’t been impacted by the crisis. “Several of our businesses that are focused on high-quality and imported materials have especially been impacted,” he said, “However, our CVS business and supply chain hasn’t been impacted.”

However, with an average growth of 15% CAGR, ZF Commercial Vehicle Control Systems will need to secure its supply chain to keep growing ahead of the market. “ZF Commercial’s growth so far has been driven by new technology products, and we want to continue that by introducing new tech,” he said, “However it is critical that we secure a local supply chain to continue growth.”

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