Aftermarket (AM) automobile-engine radiators, like other auto-body "crash parts," is a line that is proving a rising star in the auto-parts manufacturing industry in Taiwan, one of the world's largest supply depots for AM auto parts.

Vulnerably located in the front part of an automobile, radiators are often one of the main victims of head-on collisions, and are thus frequently replaced. Radiators are also replaced, on average, every six to seven years under normal conditions, as their narrow inner water ducts become congested by particles and waste generated from the engine and cooling system.

Taiwan is well positioned to capitalize on the steady rise in AM radiator demand due to its small-batch, large-variety production mode, which enables manufacturers to provide the comprehensive range of products buyers in this segment demand. Local makers have been further honing their competitive edge as one-stop shopping centers by continually developing new and more advanced radiator models.



With the exception of a few local makers that produce radiators for local and foreign automakers on original equipment (OE) terms, most makers of AM radiators in Taiwan are companies with relevant expertise, such as in aluminum extrusion, or are the affiliates of big conglomerates that have diversified into the line to strengthen the parent group's array of product lines.

In fact, the industry has a high threshold for entry in place for newcomers. The production of radiators requires high-level technology and intensive investment in equipment, especially in the molds and dies. One senior official with a local AM radiator manufacturer says, for example, that if a company wants to successfully tap the American AM market it needs to be able to offer over 200 radiator models. The combined development costs for a single radiator model, including those for aluminum cores, plastic-headed tanks, and pipes, can exceed US$12,000.

Newcomers to the local radiator market have adopted various strategies for achieving a sufficient number of product dies and molds to be competitive. Some have allied with local or overseas partners to quickly access advanced techniques and expand their model offering. Others are targeting the future market by developing more advanced radiator models while expanding their current lines of traditional models.

Both strategies require major investments and a dose of patience for returns, which may only come several years down the road. Still, the potential rewards, based on the initial results of many local firms, seem to justify the gamble.

Hot Market in Cooling Cars

One company for which this gamble has paid off is Man Zai Industrial Co., Ltd., which began making automobile radiators in 2000 with technical support from Delphi Automotive Systems of the United States. The company's entry to the radiator market was smoothed by its solid foundation in making condensers and evaporators for automobile air-conditioning systems.

Currently, Man Zai is the No. 1 supplier of AM condensers and evaporators in Taiwan as well as a leading OE supplier of such products to automakers in Taiwan and abroad. With a strong ambition to become also a major international player in the global radiator market, Man Zai is aggressively developing radiator molds. It is also developing new materials and techniques for new-generation automobile cooling solutions, including integrated radiator and condenser models, found on some European sub-compact car models, and all-aluminum radiators, which are appearing on some sport utility vehicle (SUV) models in the U.S.

Established in 1984, the QS-900 and ISO-9002 certified Man Zai began life with extensive expertise in aluminum extrusion manufacturing. Early on it decided to concentrate on the automobile air-conditioning condenser and evaporator market since such products have a short life in Taiwan's humid and dusty environment.

Man Zai was the first private aluminum extrusion maker at that time. Today, the company has comprehensive capability in the business, from material import, material formulation, and manufacturing to final processing and product assembly.

"Compared with the production techniques for radiators," says Grace Chiang, who heads Man Zai's export department, "the production techniques for condensers and evaporators are more difficult. But radiator production requires greater investment in molds for plastic-injection header tanks (each such mold costs about NT$2 million to NT$3 million, or about US$59,200 to US$88,800 at US$1: NT$33.7)."

While technology has not posed a problem for Man Zai in the radiator business, the company has been challenged to find ways to expand rapidly in the segment. After intensive evaluations, Man Zai decided to cooperate with Delphi to get instant access to core techniques, though it still does its own production in-house. With intensive efforts in the past few years, Man Zai currently has developed over 50 AM radiator models for mainly American cars and supplies several models to a local producer of Daewoo cars on OE terms. "It is just a start," Chiang claims, "Any maker that wants to tap the U.S. AM market has to have at least 200 radiator models."

As a newcomer in the radiator business, Man Zai has targeted products aimed at newer model cars--a strategy that involves meeting very high technical thresholds. Such products include all-aluminum and integrated radiator/condenser models.

"Companies with the most advanced techniques in the two new segments will gain an upper hand in the future AM market," Chiang says. Last year, Man Zai shipped about 20,000 radiators, and the volume is expected to double this year and grow at a high speed in the coming few years as the company continues to turn out new models.

With a strong ambition to strengthen its leading global position, Man Zai develops at least 50 new condenser and 50 evaporator models per year.

Man Zai is also a leading supplier of AM condensers and evaporators. Currently, the company supplies about 1,200 condenser models, mainly serpentine and parallel-flow models, and about 1,000 evaporator models, mainly parallel-flow and laminated models. Man Zai's condensers and evaporators are mainly exported to the U.S. and Europe.



The company is also developing business in Japan. According to Chiang, Man Zai has close but not formal technical cooperation ties with many global-leading condenser and evaporator makers in Japan. Such ties have helped the company access information on the most advanced techniques, materials and equipment. Recently, Man Zai signed a formal cooperation agreement with Showa Aluminum of Japan to jointly develop evaporators.

The company also set up a branch office in Japan to collect information on the most advanced techniques and market trends there. Chiang says that the new branch will serve both as a beachhead in the potential market and his company's antenna into the global automobile industry.

In addition, Man Zai outpaces most of its competitors in the world in terms of precision-die development capability, which is critical to making durable and high quality products.

Last year, Man Zai exported over 200,000 condensers and about 150,000 evaporators. All of this output was produced at the company's integrated plant in southern Taiwan's Tainan, which currently employs about 200 workers.

Sunrise Industry

Another local company that has paved its entry to the AM radiator market through alliances is Rising Sun Heat Exchanger Industry Co., Ltd. The company has been forming technical cooperation ties with various partners to expand its product line and upgrade techniques, while also pouring money into new radiator model development. The company plans to do all of its production in-house after gaining a solid foothold in the global market.

Rising Sun is a 60-40 joint venture between the Tong Yang Group, Taiwan's largest auto-parts conglomerate, and Toyo Radiator Co., Ltd. Of Japan, one of the top-three radiator suppliers to many auto brands such as Honda, Mitsubishi and Toyota.

"Rising Sun is the only Toyo affiliate that concentrates on the AM business," says Jaime Chou, manager of Rising Sun's business department.

In the past three years, Rising Sun has developed about 150 radiator models, mainly for American and Japanese car models, and the company plans to develop about 40 new models per year. The company assembles its products in Taiwan with cores made by Toyo in Japan and other plastic-injection parts (such as the header tanks) supplied by its group parent Tong Yang Industrial Co., Ltd., the world's largest plastic auto body-parts maker.

"We decided not to produce our own components in the initial stage in order to rapidly tap the market," Chou says.

According to Chou, Rising Sun helps Tong Yang Group round out its line of crash parts, while Tong Yang provides Rising Sun with an extensive marketing network--reaching over 1,800 major AM customers around the world--to sell its radiator products. Tong Yang also provides unmatched expertise in plastic injection product production to help Rising Sun develop and manufacture plastic radiator parts.

"The time is right for Rising Sun and Tong Yang to step into the international AM radiator market as more and more clients in the traditional cooling system parts market are starting to distribute crash parts as well. At the same time, an increasing number of crash parts distributors are also expanding into the radiator business as the replacement ratio of such products has been rising," says Chou.

Chou says that Toyo was the best partner for its radiator business. "We have targeted the AM market in the U.S. because it is the world's largest single market with about 15 million to 16 million cars sold per year and the average life of a radiator is about six to seven years there. The demand volume for radiators in the U.S. market is amazing and the high quality requirement there can serve as a touchstone for our future expansion into the global market."

To further strengthen its technical capability on the way to achieving full self-production, Rising Sun is actively allying with another major OE radiator maker in Taiwan.

Last year, Rising Sun sold about 110,000 radiators, in which self-produced units accounted for about 60,000 units. The company became profitable last year after only three years of operation. "2003 was a turning point for Rising Sun," Chou says.

Rising Sun's rapid rise to profitability has been aided by a clear marketing strategy, mapped out early in the game. The company aims at the higher-level segment in the U.S. market, in which product quality and safety come before price in purchasing considerations. Most of the company's U.S. customers, says Chou, are OE-parts users.

Chou is very confident about the future of his company's radiator products, though big competitors in mainland China are rapidly prying open overseas markets with low-price items. Still, he remains confident that his firm will keep its technical and management lead over mainland upstarts at least into the near term.