ZF’s Strategic Restructuring and the Future of Auto Supply Chains

ZF’s strategic restructuring in the face of evolving automotive industry dynamics has positioned the company at a critical juncture. As the global transition to electric vehicles (EVs) accelerates, ZF’s cost-cutting initiatives and strategic partnerships are being tested for their long-term viability. This analysis evaluates how these measures align with the company’s ambitions in e-mobility and its broader role in reshaping the auto supply chain.

Cost-Cutting: A Double-Edged Sword

ZF’s aggressive cost-reduction efforts have yielded measurable results. By mid-2025, the company had achieved €5.8 billion in savings against a €6 billion target for 2024–2025, driven by structural realignments such as the deconsolidation of its axle assembly business into the ZF Foxconn Chassis Modules joint venture [1]. This move not only reduced the 2024 sales decline to 3% but also streamlined operations, enabling ZF to focus on core competencies [3]. However, the financial toll of these measures is evident: a €1.02 billion net loss in 2024, largely due to restructuring costs of €600 million [2].

Despite these challenges, ZF’s adjusted EBIT margin improved to 4.4% in H1 2025, up from 3.5% in the prior year, while adjusted free cash flow turned positive at €455 million [2]. These metrics suggest that cost-cutting is beginning to stabilize the company’s financials. Yet, the reduction of over 11,200 global full-time equivalents since early 2024 raises questions about long-term workforce sustainability and innovation capacity [2].

E-Mobility: Balancing Investment and Market Realities

ZF’s commitment to e-mobility is underscored by a €3.6 billion R&D investment in 2024, with 30% of capital expenditures directed toward electrified powertrain technologies [2]. This aligns with its broader goal of nearly €18 billion in global investments by 2026, of which €10.6 billion will fund R&D [1]. Key projects include the TraXon 2 Hybrid for commercial vehicles and an electric range extender system for Chinese markets, both set to enter production in 2026–2027 [3].

However, the slower-than-expected adoption of EVs in Europe and the U.S. has forced ZF to pivot toward hybrid solutions. This strategic flexibility is critical, as it allows the company to capitalize on emerging markets while mitigating risks from over-reliance on unproven technologies. The European Investment Bank’s €425 million loan for advanced braking and steer-by-wire systems further highlights ZF’s focus on software-defined vehicles (SDVs), a cornerstone of future mobility [4].

Partnerships: Catalysts for Innovation or Dependency?

ZF’s partnerships, particularly with Foxconn and Qorix, are central to its e-mobility strategy. The ZF Foxconn Chassis Modules joint venture has already demonstrated growth potential, leveraging Foxconn’s manufacturing expertise to scale production of electrified components [1]. Meanwhile, Qorix—co-founded with KPIT Technologies and bolstered by Qualcomm’s semiconductor capabilities—positions ZF to compete in the software-defined vehicle ecosystem [3].

These collaborations reduce R&D costs and accelerate time-to-market for cutting-edge technologies. However, they also introduce dependency on external partners, which could limit ZF’s control over intellectual property and supply chains. For instance, the joint venture with Foxconn requires ZF to cede partial ownership of its axle assembly business, a trade-off that may pay dividends in agility but risks diluting core competencies.

Long-Term Viability: Navigating Uncertainty

ZF’s long-term strategy hinges on its ability to balance cost discipline with innovation. By 2030, the company aims to achieve full SDV capabilities, a goal shared by major automakers [5]. This requires not only sustained R&D investment but also adaptability to geopolitical shifts, such as regionalization of supply chains and evolving tariff policies.

The company’s recent ESG-linked Schuldschein issuance—€100 million to fund EV component production in Eastern Europe—demonstrates its alignment with decarbonization trends [1]. Yet, ZF must also address near-term headwinds, such as the first-half 2025 loss of €195 million, driven by reduced call-offs from manufacturers [1].

Conclusion

ZF’s strategic restructuring reflects a pragmatic approach to navigating the automotive industry’s transformation. While cost-cutting has stabilized its financials, the company’s long-term success will depend on its ability to execute e-mobility innovations and maintain the agility afforded by its partnerships. Investors should monitor ZF’s progress in scaling hybrid technologies, optimizing joint ventures, and managing debt, as these factors will determine its competitiveness in an increasingly software-driven and electrified market.

**Source:[1] ZF progresses with strategic realignment [https://press.zf.com/press/en/releases/release_82496.html][2] ZF Annual Report 2024 - Unlocking our Potential [https://www.zf.com/mobile/en/company/annual_report/annual_report.html][3] ZF Powers Global Mobility with Localized Innovations [https://www.autoworldjournal.com/zf-powers-global-mobility/][4] EIB supports ZF in developing advanced braking and steering for cars [https://www.eib.org/en/press/all/2024-278-eib-supports-zf-in-developing-advanced-braking-and-steering-for-cars][5] OEMs’ Deployment Strategy for the Software-Defined Vehicle (SDV) [https://autotechinsight.spglobal.com/feed?fs_site_area%5B0%5D=product]