China Engine Corp., the only maker of auto engines in Taiwan, announced recently that it planned to export SKD (semi-knock-down) parts to mainland China, India, and the Middle East for assembly in those areas. It also announced that its new 1,300cc, 16-valve engine, the second auto engine developed in Taiwan, would be installed on cars assembled on the island for export.

Adding to the string of good news, the company said that Fuzhou China Engine Co., its joint venture with the Fujian Automobile Industry Group, would begin mass production of engines later this year with an initial capacity of over 50,000 units annually. These engines will be supplied to South East Motor Corp., a carmaking joint venture between Taiwan's China Motor Corp. and the Fujian Automobile Group, as well as to Shanghai GM.

Both China Motor and China Engine are affiliates of the Yulon Group, the largest automobile conglomerate on Taiwan, which turns out automobiles in cooperation with Nissan Motor Co. and Mitsubishi Motors Corp. of Japan.

China Engine claims that it has invested about NT$400 million (US$11.5 million at NT$34.7:US$1) to develop the new engine in cooperation with Taiwan's Mechanical Industry Research Laboratories (MIRL), a unit of the Industrial Technology Research Institute (ITRI).



In the mainland, the engine is to be installed in South East Motor's new Lioncel sedan, which China Motor redesigned from an original Mitsubishi blueprint, and also in Shanghai GM's hot-selling Sail mini car according to industry insiders. China Engine says that it is also trying hard to win additional orders from carmakers in the mainland, where the annual volume of car sales is expected to reach five to six million units before many years have passed.

China Engine's president, David Lin, reports that his company hopes to win at least 10% of mainland China's engine market and is also seeking export opportunities in other areas, especially in the Asian region. One target is India, where the engines (either exported from Taiwan, or assembled locally) may be adopted for the Veryca mini commercial vehicle scheduled for local production there by a cooperative venture between China Motor and India's Premier Automobile Ltd.


Third Generation Coming


The development of yet a third homegrown engine is now under way. According to China Engine, this new "common engine" model will displace 2,000cc and have 16 valves. The company has poured NT$800 million (US$23 million) into the project, again in cooperation with MIRL, and the new engine is scheduled for certification and the beginning of mass production as early as the end of next year.



Potential applications of the third-generation engine are in the Savrin sedan, which South East Motor will begin producing early next year (assuming permission from the central government there is forthcoming), and the new Sunny sedan produced by Aeolus Motor Corp. (also of mainland China), a joint venture between Yulon Motor and the Dong Fong Automobile Group. China Motor believes that there is good potential for sales in Taiwan as well, especially to Yulon and China Motor and, perhaps, to their foreign partners as well.

According to a senior China Engine official, the third common engine can be developed in at last three sizes--2,000cc, 1,800cc, and 1,600cc--and will meet the strictest emissions requirements in Taiwan and throughout the world. The 2,000cc prototype has already been developed, and follow-up die development will be completed in about a year.

The Taiwan government commissioned ITRI to design and develop the "common engine" and transmission system back in 1992, and invested an initial NT$1.4 billion (US$40 million) in the project, with the aim of developing key auto-industry technologies and helping local carmakers escape from the tight control of foreign technical partners. ITRI chose Lotus Group International of the United Kingdom to co-develop the engine, and named Dr. Su Ping-hui, a former NASA and Ford Motor engineer, to lead the project.

China Engine was set up in mid-1995 as part of the overall project. Using technology developed by ITRI, the company is responsible for the production and sale of the engines, as well as for future design improvements. Several partners invested a total of NT$1.69 billion in the China Engine venture.

China Motor is one of largest and most active of the shareholders, with a 20% stake; others are the central government, also with 20%, Yulon Motor with 20%, Sanyang Industry with 20%, Chiao Tung Bank with 15%, and Sington Transportation Implements with 5%.

So far, China Motor is the only local auto maker to adopt the "common engine." It began using the first 1,200cc, eight-valve model in its Varica and step-up versions of its bread-box minivans in late 1998, and now purchases between 10,000 and 20,000 engines per year. Despite the small volume of sales, China Engine turned profitable in 2001 thanks to a streamlined workforce and vigorous business expansion efforts.