How ZF aims to gain from the move to software-defined vehicles

ZF Friedrichshafen has restructured a key area of its business in response to the rising interest in software-defined vehicles. The German supplier this year created the Chassis Solutions unit, which combined ZF's passenger car chassis technology and active safety technology. Peter Holdmann leads the division, which prior to its formation accounted for more than €14 billion ($15.2 billion) in combined revenue. Holdmann said that a big challenge his team faces is to accept that “in the future software comes first.” With that in mind, he wants ZF's software expertise to reach a “flawless” level by mid-2025. He has also challenged his team to release at least one new function every other month that ZF can promote on social media starting this year. He discussed this and more with Automotive News Europe Managing Editor Douglas A. Bolduc and Correspondent Lois Hoyal.

Why did you create the Chassis Solutions unit?

The motivation for merging the two businesses was largely because of the rising interest in software-defined vehicles. The SDV puts the onus on us to produce chassis development for all three dimensions of vehicle dynamics – lateral (steering), longitudinal (braking) and vertical (damping) – in one division. The reason is that in the future we will develop more and more customer-relevant functions and features. To do this we won't just optimize one actuator. We will need to optimize the so-called team-play of multiple actuators.

How experienced is ZF in creating actuators?

We have developed several actuators, including for rear-wheel steering. Today, we are the market leader. We started with the Porsche 911 around 2011. The creation of the Chassis Solutions division also merged our rear-wheel-steering business with our front-steering business.

How will this be beneficial?

We are already seeing RFQs (requests for quotations) because there is a clear trend toward offering rear-wheel steering that is being caused by the move to e-mobility.

Why is that?

Automakers are making the wheelbase longer for the batteries to fit. To ensure the car has the same agility, some of our customers are adding rear-wheel steering. We are seeing strong demand because we are able to offer a complete package of chassis products.

Has ZF set specific targets for its rear-wheel-steering business?

Currently we serve global demand for our rear-wheel steering from our plant near Graz, Austria. But with so much growth here we are going to establish assembly lines for rear-wheel steering in both Mexico and China. The volume for rear-wheel steering systems will double over the next two years, taking us to roughly €300 million.

How does ZF aim to capitalize on the move to SDVs?

We must be prepared to offer hardware and software independently from one another. What does the SDV mean for the chassis area? What will change is that more functions will move from the actuators to central electronic control units. For example, in the steering or braking system they will be moved to a central ECU. This trend will accelerate in the coming years. I am convinced that 30 to 40 percent of vehicle platforms will be zone- and domain-controlled from 2025 onwards. This gives us the opportunity to orchestrate all the actuators on the chassis side in all three dimensions in parallel. Our in-house developed cubiX software does just that. CubiX can control our actuators as well as actuators from any competitor. An example of this is the new Lotus Eletre.

What ZF products does cubiX control in the full-electric SUV?

It controls, for example the front steering, the braking system, the vertical dynamic system and the semi-active damping. Meanwhile, it also controls the rear-axle steering that comes from a competitor. So, cubiX is a holistic vehicle dynamics control software that can deal with both sensor-controlled actuation as well as service-controlled activation.

How does ZF charge for cubiX?

It's a completely different business model to what we have for our other products. We get a license fee for the software for every car that is produced by our customers.

What distinguishes ZF from its competitors when it comes to SDVs?
With the broadest product range across all dimensions of driving dynamics – lateral, longitudinal and vertical – and their chassis actuators under one roof – including brakes, steering, suspension, chassis components as well as software solutions and chassis architectures – we ideally fulfill the requirements for the software-defined vehicle. At ZF this is a core USP (unique selling point). We have steering systems for the front and rear and we have a vast braking system portfolio that includes brake-by-wire solutions. As a side note, we are in an ideal position in braking because some of our competitors sold their foundation brake businesses years ago. Now if they need active calipers for a car with brake-by-wire they need to look for partners. The caliper business is one of our corporate competences. Electric park-braking-systems can be further enhanced and contribute to the car's software-defined chassis. All of this is in our hands. In addition, we have vertical dynamic systems that use everything from conventional and semi-active shock absorbers to active shock absorbers. Because electric cars are heavier than conventionally driven cars there is a significant trend toward fitting them with air spring systems that include semi-active dampers. We are the market leader here. The next step is a fully active suspension system, which we offer. These systems are especially popular in Asia, where premium automakers have shown strong interest in adding fully active suspensions to premium vehicles.

How do they work?

A high-powered power unit is added and provides energy to actuators at every corner of the car. There recently was a SOP of our active dampers with a prestigious European manufacturer.

What is the outlook for fully active suspension?

Fully active suspensions are a niche application but a potentially decisive distinctive feature in cars of the premium segment. What will become mainstream is adding air springs and semi-active damping.

Are there different trends when it comes to suspension in different parts of the world?

Yes. In the West, premium automakers, particularly the German premium brands, are adding fully active roll control combined with an air-spring system and semi-active damping. This gives the car a more agile and direct ride & handling as well as excellent comfort.

Is there increasing demand to improve ride comfort?

Yes. As the car takes on more autonomous driving functions, the driver becomes more sensitive to the car's ride and handling. Therefore, our customers are placing a higher priority on the car's vertical dynamic behavior, especially how the vertical systems act in combination with braking, acceleration or steering maneuvers. None of our main competitors have the full range of products and solutions for vertical dynamics to compete with us in this area.

How much of the business is focused on SDVs now and will that change in the next five years?

I cannot give you percentages, but I can say SDVs are becoming more and more crucial. Even cars in price-sensitive volume segments are adding more and more software functions. You can select semi-active damping in the car if you want to have a sporty setup or opt for a comfortable setup or an economical setup, which is all combined with the software-defined functions in the chassis. The move to e-mobility has increased the demand for so-called leveling systems that allow the driver to lower the car at certain speeds to achieve better aerodynamics to extend the driving range. This trend is addressed by a software function in the chassis.

How soon will ZF see software surpass hardware as the company's main source of revenue?

Achieving more revenue with software than with hardware is not something that is on the horizon. One of ZF's USPs is that you must have both software and hardware. In the end, from a pure engineering point of view the hardware defines the control path. If you know the user behavior of your control element, you are in a better position to define the software that controls the functions and features.

What is the hardware versus software breakdown now?

When we sell the hardware and software in a product today the software portion is less than 10 percent of the total value.

Will that change in the coming years?

We need to be prepared for three scenarios: selling the hardware independently, selling the software independently or a combination of the two. Of course, our target is to be a state-of-the-art market leader in both software and hardware. It's true that we will grow faster in software because we came from nothing and expect to have a significant growth rate in the coming year. However, my division last year generated €12 billion in revenue from just hardware. It will take some time before we grow our software business to a similar size.

Is there a long-term target?

For the chassis business, my target would be to reach one-third of the revenue with software and two-thirds with hardware in 10 years' time.

Do you think you're going to be working more with partners?

Our established partnership with Goodyear is a good example of what we are intending to do going forward. The data from the tire available in our cubiX software helps us to be more precise, and we will further extend this kind of ecosystem in the coming years because we can't manage every element that contributes to vehicle dynamics software. We need strong partners for that.

What do you see as the key challenges ahead for the industry in terms of SDVs?

The main challenge for every engineer participating in this transformation is to accept that in the future software comes first. This is a big change because for years we developed the hardware first and then applied the software to it. Now you do it the other way around. You start by defining the software and make sure it is hardware independent. That means the DNA of a car's vehicle dynamics is defined through software.

Where is this already happening?

In steer-by-wire and brake-by-wire systems. Ultimately, electronically controlled active suspension systems are also by-wire systems, which provide significantly higher flexibility in the way you develop functions. 

Is the move to SDVs changing the way you recruit talent?  
Yes. We have a new focus on competencies. It's no secret that the development of software requires different skills than the development of hardware. The complexity of software development is significantly higher than that of hardware. There are many examples of new vehicles being delayed because the software is not ready.

Has ZF also been challenged?

Yes. It has also been a challenge for us to develop software in a capable way. If I'm honest, this was not our key strength in certain projects in recent years. So, a clear focus of the new division is to guarantee flawless execution in the development of software. If you are not capable of offering that to the market, then you will not be able to acquire new software business.

How close is ZF to being able to achieve flawlessly executed software? Are you there yet or do you need more time?

We are on a good track. We now know what we need to do but this requires certain processes, resources, competencies and structures to be established. We have a clear plan, and my target is that we should be ready by the middle of next year at the latest. Of course, there are a lot of extra measures in ongoing projects to keep everything on track for the customer.

What benefits of SDVs make them so important to the ZF and the industry?

They are so important because SDVs provide the end customer with a significant extension of the functions and features they can offer, which makes the car more attractive. Our target with any development is to have a product that creates customer value. With an SDV, we can create significantly more customer value. This creates more sales for our customers and ultimately more sales for us.

There is increasing pressure to bring vehicles and technologies to the market faster. What is driving this?

Virtual validation is becoming a standard element in development. If you are not capable of doing adequate simulations upfront, you will not complete development in the time for customers. This is largely because of the development speed shown in China. It's amazing. ZF has a strong presence in China because we know we have to offer the same competency level there as we do in Germany. We have shown in China that we can take a steering system from order to market launch within 12 months. It used to take three to four years.

How else will China affect how ZF does business in the future?

In the future, a significant portion of ZF's chassis division's advanced development will be managed in China. That is because China has become a technology trendsetter. Also on the chassis side, we always saw that new technologies went from the West to the East, but in the future that it also will be the other way around. I want ZF to gain from China's speed for automotive innovation. Speed is key. Automakers are no longer going to put up with a three- or four-year wait. It's going to be 12 months or less. In China, the classic model cycle of six to seven years is being dramatically shortened. Ultimately, this is accelerating a different type of sourcing behavior by our customers, which also must be adjusted.  

Are you planning to offer special ZF-created functions and licensing for your functions? For example, ZF's Crab Walk function.

This is under consideration, but in the end, we must convince our customers. Many automakers do not want to have this combination of supplier branding and their branding because ultimately it makes them dependent on the supplier. But when they do it is a very high honor. We have one example. There are special versions of two Subarus (the Levorg and WRX) with our CDC (continuous damping control) technology. It is the first time that “ZF Inside” is part of the branding on a car. ZF has a team that does software development for functions and features across our product lines. I have given the team a challenge. Starting this year, I want them to release at least one function every other month that we can promote on social media. The aim is to showcase the competence of the chassis division and to create market interest for the functions and features we can offer with cubiX to every customer in the world.