Taiwan's Auto Production Hits Record High in 2004

Taiwan's automotive-production industry has been chosen by the island's government as a target for special development. The production value of Taiwan's automotive industry reached a record high of NT$385 billion (US$11.44 billion at US$1: NT$31.3) in 2004, up 13.6% from the previous year.



The total includes finished autos, at NT$217.6 billion (US$6.95 billion), up 11.2% from 2003, and auto parts, which reached NT$167.4 billion (US$5.35 billion). However, it does not include automobile tires, batteries, glass, lamp bulbs, air-condition systems, electrical parts, in-car multimedia systems, or navigation products, says the Taiwan Transportation Vehicle Manufacturers' Association (TTVMA). If included, the 2004 total would have surpassed NT$400 billion (US$12.8 billion).

Auto Parts

With such competitive advantages as excellence and experience in small-batch, large-variety production and sector-model production flexibility, in addition to a consistent focus on innovative R&D and technical upgrading, Taiwan's local makers of auto-parts products have been steadily sharpening their global competitiveness, especially in the aftermarket (AM) segment.

The export value of Taiwan-made auto parts has been growing markedly in recent years. In 2004 the sector's value reached a record high of NT$127.3 billion (US$4.07 billion), or, as the TTVMA reports, equals to the value of 250,000 finished cars priced at NT$500,000 (US$16,000) each. This type of export performance is "invaluable" for a nation with an annual domestic new-auto sales volume of less than 500,000 units (430,000 in 2004), comments Huang Wen-fang, chief of TTVMA's business-affairs section.

The major destinations for Taiwan-made auto parts are the United States, China, Hong Kong, and Japan. In 2004 exports to the U.S. were about NT$45.3 billion, or US$1.45 billion, and accounted for 35.5% of overall exports. Those to mainland China were NT$10.8 billion (US$345 million, 8.49%), and to Hong Kong NT$8.1 billion (US$258.8 million, 6.32%), most of which were then sent on to China proper. Exports to Japan were NT$6.1 billion (US$194.9 million, 4.77%). The top four together accounted for 55.17% of Taiwan's total parts exports last year.

Parts exports to China enjoyed the highest growth in 2004, at 172.13% over the 2003 tally. Demand in that market skyrocketed in line with surging domestic auto sales and production. Taiwan, according to Huang, has a clear geographic advantage for the market, and Taiwan-made parts have reached world-class quality level while still sporting reasonable price-tags. In addition, Huang says, various local automakers including Yulon Motor Co. and affiliated China Motor Corp. have set up auto-production ventures in China, increasing China-based demand for MIT (made-in-Taiwan) parts.

In terms of product-category breakdown, "parts and accessories for other motor vehicles" was No. 1 in 2004, accounting for 45.99% of the total at NT$58.58 billion (US$1.87 billion). This meant growth of 23.21% over 2003. No. 2 was "electrical headlights and taillights for motor vehicles and motorcycles," at NT$9.77 billion (US$312 million), 7.67% of total exports, and a growth ratio of 22.95%. In third, fourth, and fifth, respectively, were "other parts and accessories for bodies (including cabs) of motor vehicles," "radial tires used on motor vehicles (including station wagons and racing cars)," and "other new pneumatic tires, of rubber, used on motor vehicles (including station wagons and racing cars)."

Solid Prospects

Taiwan-made auto parts, due to their high quality and competitive prices, are expected to continue enjoying high export growth through the remainder of this year, Huang says, in conjunction with predicted growth of 3.3% in the global economy in 2005. In terms of individual markets, growth is predicted to be 3.5% in the U.S., 1.6% in the European Union, 1.5% in Japan, and 8.2% in China.

Huang also points out that many local auto-parts makers have negotiated with their foreign customers over price hikes in a bid to confront rising materials prices. Huang states that the materials-price hikes are not expected to generate undue negative impact on Taiwan's auto-parts exports this year, but says local makers have o keep a close eye on changes in currency-exchange rates, with any rapid movements quickly eating into profits.

According to Huang, as local automakers are playing an increasingly important role in their foreign technical partners' global division-of-labor networks, exports of Taiwan-made complete autos and parts are expected to continue growing in coming years.

For example, Taiwan's China Motor, which produces redesigned Mitsubishi car and commercial-vehicle models in Taiwan and mainland China, has been Taiwan's No. 1 complete-auto exporter for the past two years (2003 and 2004), and is expected to continue its increase in terms of auto-export volume this year as well.

In 2004 the automaker exported NT$16.4 billion (US$524 million) worth of auto parts to Mitsubishi's overseas auto plants in Japan, mainland China, Indonesia, the Philippines, and Vietnam. China Motor attributes this solid parts-export performance to the outstanding parts-design and -manufacturing capabilities of local original equipment (OE) parts suppliers.

In 1997, Taiwan's China Motor started designing Mitsubishi's "world-car" model, the Freeca commercial/recreational van, for the Japanese partner and supplying many exterior and interior auto parts and accessories to Mitsubishi's overseas markets for final assembly. In addition, China Motor's Chinese subsidiary, South East Motor Corp. (based in Fujian Province) also opted for a large ratio of Taiwan-made auto parts in some of its passenger-car models, such as the Lioncel (Lancer in Taiwan) compact sedan.

Both the two car models, according to Huang, have proven Taiwan automakers' strong design ability and the quality/price competitiveness of local parts suppliers. And the strengths are expected to continue increasing as more and more Japanese and American big auto brands are contracting Taiwan partners to design car models that meet regional customers' (especially those in China) special tastes and supply auto parts in lower costs. Yulon, for example, has participated Nissan's new-car development projects to develop a series car models in cooperation with the partner for sales in China.