The auto-parts industry has long been a major manufacturing sector in Taiwan, but the past decade or so has seen especially simmering development of the line as local producers make steady quality and technical gains-aggressively trying to satisfy global demand for aftermarket (AM) parts.
According to statistics compiled by the Taiwan Transportation Vehicle Manufacturers` Association (TTVMA), the export value of Taiwan-made auto parts has risen rapidly in recent years, reaching NT$132.9 billion (US$4.03 billion at US$1: NT$32.7) in 2006, for the ninth year straight as favorable signs appear in the major North American and European markets.
There are about 2,500 auto-parts companies in Taiwan, with the majority of them being small and medium enterprises (SMEs). Of the total annual export value, AM parts account for about 80%, while OE parts to international automakers make up most of the balance.
Wide Product Range
The auto-parts renaissance in Taiwan shows no signs of slackening any time soon. Already the world`s No. 1 supplier of AM auto-parts (accounting for over 80% of North America`s "crash parts" market), Taiwan is expected to widen its industry lead in this segment as Europe opens its replacement-parts market. Local producers are also winning a growing share of outsourced orders from big international automakers and tier-one parts suppliers in the U.S. and Europe.
Competitive both qualitatively and price-wise, Taiwan`s auto parts makers have been making their way onto the international stage in recent years and the future looks even more promising.
In the AM parts business, many Taiwan companies have not hesitated to invest more capital to maintain unmatched product ranges. A wide product selection is a key factor to success in the AM parts business, in which buyers generally prioritize "one-stop-shopping." As global car ownership continues to rise, the AM parts market is rapidly expanding and the winners will be those with the capability to produce a large variety of items in small batches.
Logistics is another key factor in the AM parts business. Taiwan AM parts suppliers are among the strongest players in the world when it comes to container-consolidation and rapid shipment thanks to their state-of-the-art inventory management systems and the clustering of AM parts suppliers.
More and more Taiwan companies have successfully found niches in the supply chains serving global automakers and tier-one parts buyers in recent years. Such achievement is both challenging and critical to sustained success as automakers and major parts suppliers might maintain close partnerships for 50 to even 100 years.
Taiwan`s success in this sector is attributable mostly to the cost competitiveness local producers have mastered-offering both irresistible prices and uncompromising quality to automakers and tier-one parts suppliers. The upside for Taiwan auto-parts makers, via linking into the global supply chains for AM and OEM parts, is a long overdue escape from the saturated local market, where only about 400,000 to 500,000 new cars are sold each year. As local producers continue to upgrade their reputation as world-class suppliers capable of tier-one quality and technical expertise, there has been an increase in exports of OE parts, especially to the offshore plants run by Japanese automakers, which is likely due to the long-standing presence of Japanese cars in Taiwan dating to the 1960s.
In short, Taiwan companies now supply products to numerous automakers and tier-ones in the U.S. and Europe, and the number is certain to rise higher in the next few years as many local suppliers are now in talks with big international purchasers.
Complete-vehicle Exports
Automaker (Brand) | Exported Model | Market | Export Value Goal |
CMC (Mitsubishi) | Zinger and Space Gear (commercial van), Grunder (medium sedan), Veryca (mini commercial vehicle) | The Philippines, the Middle East, Southeast Asia, Latin America | NT$6 billion |
Ford Lio Ho (Ford) | Ford Escape, Mazda Tribute (SUV) | Japan, New Zealand, Australia | NT$6 billion |
Kuozui (Toyota) | Altis (compact sedan) | Southeast Asia | NT$5 billion |
Yulon Nissan (Nissan) | Serena Q-RV (recreational/commercial van), Cabster (3.5-ton truck), Livina Genisis (mini-van) | The Philippines, Mexico | NT$700 million |
Source: The companies
Advantages
While low cost has certainly given Taiwan auto parts makers a competitive leg up, it is only one side of the coin-also noteworthy is that would-be competitors will have to match a series of production advantages Taiwan suppliers wield before posing a serious threat in this sector.
First, Taiwan auto parts producers are backed by a self-contained, highly efficient satellite plant system that enables optimal production flexibility, product range and cost savings while minimizing development time. Such system also allows individual suppliers to specialize and excel in their fields.
Another advantage held by local auto parts makers is the division-of-labor manufacturing strategy: With plants on both sides of the Taiwan Strait, producers can effectively adapt to customer needs in terms of pricing, quality, quantity, and shipment schedule.
Third, auto parts makers in Taiwan may be one of the few anywhere to buck the economy-of-scale theory by accepting small-volume but large-variety orders, which perfectly suits the needs of many buyers sourcing for 500 units each of 100 different items. Some attribute such adaptability to highly flexible management and scientific cost-control, while others simply credit Taiwan suppliers for being gung-ho survivors in the AM and OE parts sectors.
(by Quincy Liang)
