Local and Global Factors Drive Down Taiwan Automotive Production Value

Impacted by a host of factors on local and global scales, Taiwan's automotive industry continued to dwindle in terms of production value in 2007, including the assembled-vehicle and auto-parts sectors, totaling some NT$298.99 billion (US$9.34 billion at US$1: NT$32) or down 3.39% from that of the previous year, according to the statistics released by the IEK-ITIS, the government-sponsored researcher Industry & Technology Intelligence Services (ITIS) as part of the Industrial Economics & Knowledge Center (IEK) under the Industrial Technology Research Institute.

IEK-ITIS attributes the above-mentioned downturn to various factors, including compromised consumer confidence in the wake of the upsets in global financial markets, continual price hikes of raw materials, highflying gasoline prices, reported slowdown in the American economy, uncertainties in Taiwan politics with the upcoming presidential election in March 2008, etc.

Of the total automotive production value, assembled vehicles made up NT$145.4 billion (US$4.54 billion), down 8.93% from 2006; while auto-parts contributed NT$153.5 billion (US$4.8 billion), up 2.51% from a year earlier, and outstripping that of assembled-vehicles for the first time.

Mid-sized & Compacts the Majority

Mid-sized and compact passenger cars of 2,000c.c. displacement or less accounted for the lion's share, at 63.99%, of the overall assembled-cars production value at NT$93 billion (US$2.91 billion), down 9.96% from the previous year. Passenger/commercial vehicles made up NT$22.19 billion (US$693.63 million, an increase of 71.24%); large passenger cars (engine displacement over-2,000cc) accounted for NT$15.59 billion (US$487.13 million, a decrease of 18.39%); light trucks NT$8.96 billion (US$280.06 million, a decrease of 39.54%); and heavy-duty automobiles NT$5.63 billion (US$175.94 million, a decrease of 40.44%).

The recession in Taiwan caused by the above-mentioned factors has also eroded new-car sales, even in early 2008 and surprisingly the traditional, pre-Chinese New Year high season in early February. January saw only 35,077 new cars sold, down 17% from the same period of 2007. Most major carmakers in Taiwan, in a bid to raise their equipment- utilization rates, have been pleading with their foreign technical partners to provide more opportunities, likely by increasing technological transfers, so that automakers on the island may gear up to export locally-made cars.

Such ambitious effort to become more independent carmakers is paying off: Yulon Nissan Motor Co. will begin exporting locally-made Nissan Cabster light trucks to Mexico through its Japanese technical partner's sales channel; Ford Lio Ho Co., Ltd. is to export locally-made Ford/Mazda sport utility vehicles (SUVs) to Japan, New Zealand, Australia, Russia, etc.; and Kuozui Motors Ltd. would ship abroad locally-assembled Toyotas by 2009.

IEK-ITIS, as result, is optimistically forecasting substantial growth in the total assembled-vehicle export value, which would consequentially enhance the local vehicle production value, raising it to NT$147.8 billion (US$4.62 billion) this year, up 1.5% from 2007.

Another development incidental to the unprecedented rise in global gasoline prices is that, says IEK-IT IS, more people will be taking public transit, while car buyers in Taiwan will be looking at gas-efficient compact cars instead of mid-sized and large counterparts. Such trend is relatively moderate compared to the measures long taken in Japan, where gas prices are far higher than those in Taiwan and where gas-sipping economy-cars of sub-1,000 c.c. displacement have roamed the narrow streets for years. In fact a TV program in Taiwan highlighted a group of radical gas-miserly drivers in Japan who resort to various street-smart techniques to maximize gas mileage for every liter of precious fuel, including turning off the engine during long idles, pumping the accelerator, coasting downhill by shifting into neutral, etc.

Auto Parts Sector Spared

In contrast to new-car sales and assembled-car production in Taiwan, the local auto parts sector, which is export-oriented, was relatively spared in 2007 thanks to increased exports to major markets such as the United States, Australia, Europe, Southeast Asia (especially Thailand and Indonesia).

The auto-parts sector in Taiwan generated some NT$1,53.5 billion of products in 2007, up 2.51% from a year earlier, of which the "others" product category accounted for the highest share of 49.68% (NT$76.29 billion, or US$2.48 billion, a 0.25% decrease from the previous year), followed by electrical parts (NT$31.23 billion or US$975.97 million, an increase of 10.11%).

IEK-ITIS says that the auto-parts makers in Taiwan have been eagerly developing overseas markets. Several favorable conditions will help the sector in Taiwan in 2008: the final judgment handed down by the high court in the U.S. has further liberalized the aftermarket (AM) collision-parts segment stateside to imports; the increasing popularity of AM parts in Europe; and a continual upturn in the numbers of European/American automakers coming to Asia, to cut costs back home, to find original equipment (OE) parts suppliers. The prediction is for the island's auto-parts production value to grow by an additional 6% in 2008 to total some NT$159.9 billion (US$4.9 billion).

The degree of innovation in the local automotive industry likely dipped in 2007: IEK-ITIS points out that the value-added ratio (VAR) of the industry in Taiwan slipped 1.57% to reach 18.45%, with the added-value achieved by the industry totaling some NT$55.1 billion (US$1.72 billion), down 4.91% from the previous year.

Taiwan's Automotive Production Value (2002-2007)                      Unit: NT$1 million
Year		2002	2003	2004	2005	2006	2007(e)	YoY
Type of assembled vehicle	Medium & Compact Passenger Car	114,834	146,683	154,908	165,686	103,374	93,074	-9.96%
	Large Passenger Car	9,898	15,926	24,861	25,767	19,101	15,588	-18.39%
	Light Truck	10,860	11,195	15,289	17,481	14,822	8,962	-39.54%
	Passenger & Commercial Vehicle	18,205	16,806	16,592	13,836	12,962	22,196	71.24%
	Heavy-duty Truck/Bus	4,215	4,977	8,048	7,878	9,453	5,630	-40.44%
	Sub-toal	158,012	195,587	219,698	230,648	159,712	145,450	-8.93%
Auto Parts	Engine Parts	11,773	11,871	13,873	15,247	13,122	14,175	8.03%
	Transmission Parts	14,987	18,292	20,366	22,179	19,866	20,263	2.00%
	Steering Parts	1,343	1,417	1,617	2,260	1,866	2,075	11.18%
	Electrical Parts	17,312	22,737	27,021	28,365	28,364	31,231	10.11%
	Brake Parts	4,204	5,020	5,142	5,121	5,903	5,681	-3.76%
	Auto Gauge	1,739	1,923	2,380	2,265	1,708	1,692	-0.96%
	Truck/Bus Body Parts	1,426	1,154	1,460	1,225	1,310	1,056	-19.35%
	Truck/Others Body Parts	1,343	899	1,319	1,468	1,168	1,084	-7.23%
	Others	76,786	80,226	94,534	93,875	76,481	76,286	-0.25%
	Sub-total	130,913	143,539	167,712	172,005	149,788	153,543	2.51%
Total		288,925	339,126	387,410	402,653	309,500	298,993	-3.39%
Source: IEK-ITIS (February 2008).

　

Taiwan Automotive Industry Added-value (2002-2007)        Unit: NT$1 million
Year	2002	2003	2004	2005	2006	2007(e)	YoY
Production Value	288,925	339,126	387,410	402,653	309,500	298,993	-3.39%
Added Value	91,055	95,103	101,205	84,808	58,011	55,162	-4.91%
VAR	31.52%	28.04%	26.12%	21.06%	18.72%	18.45%	-1.57%
Source: IEK-ITIS (February 2008).